10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________________________

FORM 10-Q

________________________________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34777

________________________________________________________________________

BroadSoft, Inc.

(Exact name of registrant as specified in its charter)

________________________________________________________________________

Delaware	52 2130962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9737 Washingtonian Boulevard, Suite 350 Gaithersburg, MD	20878
(Address of principal executive offices)	(Zip Code)

(301) 977-9440

(Registrant’s telephone number, including area code)

________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

The number of shares outstanding of the Registrant’s common stock, par value $0.01 per share, on October 27, 2016, was 30,143,503.

BroadSoft, Inc.

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months September 30, 2016 and 2015	5
Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2016 and 2015	6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015	7
Notes to Condensed Consolidated Financial Statements	8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	41
ITEM 4. Controls and Procedures	42
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	44
ITEM 1A. Risk Factors	44
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
ITEM 3. Defaults Upon Senior Securities	44
ITEM 4. Mine Safety Disclosures	44
ITEM 5. Other Information	44
ITEM 6. Exhibits	45
SIGNATURES	46

2

PART I. Financial Information

ITEM 1. Financial Statements

BroadSoft, Inc.

Unaudited Condensed Consolidated Balance Sheets

	September 30, 2016			December 31, 2015
	(In thousands, except share and per share data)
Assets:
Current assets:
Cash and cash equivalents	$	100,047		$	175,857
Short-term investments	149,354			72,531
Accounts receivable, net of allowance for doubtful accounts of $207 and $85 at September 30, 2016 and December 31, 2015, respectively	104,521			108,113
Other current assets	15,650			13,155
Total current assets	369,572			369,656
Long-term assets:
Property and equipment, net	19,948			19,481
Long-term investments	117,807			102,385
Intangible assets, net	21,805			18,835
Goodwill	79,710			72,275
Deferred tax assets	10,917			1,661
Other long-term assets	7,397			8,081
Total long-term assets	257,584			222,718
Total assets	$	627,156		$	592,374
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable and accrued expenses	$	32,102		$	28,667
Deferred revenue, current	96,034			106,483
Total current liabilities	128,136			135,150
Convertible senior notes	197,759			188,331
Deferred revenue	6,015			4,571
Other long-term liabilities	6,078			7,289
Total liabilities	337,988			335,341
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at September 30, 2016 and December 31, 2015; no shares issued and outstanding at September 30, 2016 and December 31, 2015	—			—
Common stock, par value $0.01 per share; 100,000,000 shares authorized at September 30, 2016 and December 31, 2015; 30,069,633 and 29,080,197 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively.	301			291
Additional paid-in capital	372,201			333,153
Accumulated other comprehensive loss	(17,009		)	(13,810		)
Accumulated deficit	(66,325		)	(62,601		)
Total stockholders’ equity	289,168			257,033
Total liabilities and stockholders’ equity	$	627,156		$	592,374

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Operations

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenue:
License software	$	31,486		$	31,343		$	95,992		$	84,370
Subscription and maintenance support	36,509			29,828			106,348			82,263
Professional services and other	16,127			7,926			36,639			22,619
Total revenue	84,122			69,097			238,979			189,252
Cost of revenue:
License software	1,799			2,444			5,697			7,984
Subscription and maintenance support	11,894			9,787			34,060			28,958
Professional services and other	10,060			9,429			27,340			20,949
Total cost of revenue	23,753			21,660			67,097			57,891
Gross profit	60,369			47,437			171,882			131,361
Operating expenses:
Sales and marketing	26,112			20,738			75,386			59,852
Research and development	19,931			14,974			58,120			45,524
General and administrative	12,759			10,955			36,675			31,366
Total operating expenses	58,802			46,667			170,181			136,742
Income (loss) from operations	1,567			770			1,701			(5,381		)
Other expense:
Interest expense	3,959			2,848			11,738			6,864
Interest income	(683		)	(323		)	(1,950		)	(819		)
Other, net	(207		)	4,089			(533		)	5,312
Total other expense, net	3,069			6,614			9,255			11,357
Loss before income taxes	(1,502		)	(5,844		)	(7,554		)	(16,738		)
Benefit from income taxes	(897		)	(2,593		)	(2,545		)	(5,294		)
Net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
Net loss per common share:
Basic and diluted	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)
Weighted average common shares outstanding:
Basic and diluted	29,878			29,322			29,491			29,182
Stock-based compensation expense included above:
Cost of revenue	$	2,225		$	1,901		$	6,118		$	5,287
Sales and marketing	4,973			2,812			13,321			10,048
Research and development	4,249			2,428			11,414			8,933
General and administrative	2,574			2,016			7,454			6,119

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands)
Net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	(637		)	(1,133		)	(4,171		)	(3,118		)
Unrealized gain (loss) on investments	(172		)	112			972			155
Total other comprehensive loss, net of tax	(809		)	(1,021		)	(3,199		)	(2,963		)
Comprehensive loss	$	(1,414	)	$	(4,272	)	$	(8,208	)	$	(14,407	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except per share data)

	Total Stockholders’ Equity			Common Stock Par Value $0.01 Per Share					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit
				Shares		Amount
Balance December 31, 2015	$	257,033		29,080		$	291		$	333,153		$	(13,810	)	$	(62,601	)
Issuance of common stock for exercise of stock options and vesting of RSUs and PSUs, net of effect of withholding tax	828			990		10			818			—			—
Stock-based compensation expense	38,106			—		—			38,106			—			—
Tax windfall benefits on exercises of stock options	1,409			—		—			124			—			1,285
Foreign currency translation adjustment	(4,171		)	—		—			—			(4,171		)	—
Unrealized gain on investments	972			—		—			—			972			—
Net loss	(5,009		)	—		—			—			—			(5,009		)
Balance September 30, 2016	$	289,168		30,070		$	301		$	372,201		$	(17,009	)	$	(66,325	)
Balance December 31, 2014	$	212,961		28,943		$	290		$	258,169		$	(7,712	)	$	(37,786	)
Issuance of common stock for exercise of stock options and vesting of RSUs, net of effect of early exercises and withholding tax	(4,539		)	640		6			(4,545		)	—			—
Repurchase of common stock	(25,002		)	(791	)	(8		)	—						(24,994		)
Equity component of 2022 convertible senior notes issuance, net of issuance costs	67,792			—		—			67,792			—			—
Equity component of 2018 convertible senior notes repurchase	(6,751		)	—		—			(6,751		)	—			—
Deferred tax liability related to convertible senior notes, net	(23,446		)	—		—			(23,446		)	—			—
Stock-based compensation expense	30,595			—		—			30,595			—			—
Tax shortfall on exercise of stock options	(753		)	—		—			(753		)	—			—
Foreign currency translation adjustment	(3,118		)	—		—			—			(3,118		)	—
Unrealized gain on investments	155			—		—			—			155			—
Net loss	(11,444		)	—		—			—			—			(11,444		)
Balance September 30, 2015	$	236,450		28,792		$	288		$	321,061		$	(10,675	)	$	(74,224	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

	Nine Months Ended   September 30,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net loss	$	(5,009	)	$	(11,444	)
Adjustment to reconcile net loss income to net cash provided by operating activities:
Depreciation and amortization	13,293			11,844
Amortization of software licenses	2,423			2,614
Stock-based compensation expense	38,307			30,387
Provision for doubtful accounts	207			6
Benefit from deferred income taxes	(5,923		)	(5,585		)
Excess tax benefit related to stock-based compensation	(197		)	(1,247		)
Non-cash interest expense on convertible senior notes	9,428			5,441
Payment of original convertible senior notes issuance discount	—			(1,094		)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	4,788			(18,005		)
Other current and long-term assets	(3,493		)	(6,718		)
Accounts payable, accrued expenses and other long-term liabilities	3,049			4,324
Current and long-term deferred revenue	(9,133		)	7,723
Net cash provided by operating activities	47,740			18,246
Cash flows from investing activities:
Additions to property and equipment	(10,377		)	(10,813		)
Payments for acquisitions, net of cash acquired	(21,427		)	(17,733		)
Purchases of marketable securities	(207,896		)	(155,333		)
Proceeds from sale of marketable securities	73,251			101,933
Proceeds from maturities of marketable securities	42,400			57,251
Net cash used in investing activities	(124,049		)	(24,695		)
Cash flows from financing activities:
Proceeds from the exercise of stock options	13,866			2,983
Taxes paid on vesting of RSUs	(13,038		)	(7,522		)
Excess tax benefit related to stock-based compensation	197			1,247
Repurchase of common stock	—			(25,002		)
Proceeds from issuance of 2022 convertible senior notes, net of issuance costs	—			194,822
Repurchase of 2018 convertible senior notes	—			(48,601		)
Net cash provided by financing activities	1,025			117,927
Effect of exchange rate changes on cash and cash equivalents	(526		)	(1,184		)
Net increase (decrease) in cash and cash equivalents	(75,810		)	110,294
Cash and cash equivalents, beginning of period	175,857			101,543
Cash and cash equivalents, end of period	$	100,047		$	211,837

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business

BroadSoft, Inc. (“BroadSoft” or the “Company”), a Delaware corporation, was formed in 1998. The Company is the leading global provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based Unified Communications, or UC, to their enterprise customers.

2. Financial Statement Presentation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.

Interim Financial Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification for interim financial information and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016 or any other period. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on February 29, 2016.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers: Topic 606 ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The standard's core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard allows entities to apply either of two adoption methods: (a) retrospective application to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (b) retrospective application with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Topic 606 ("ASU 2015-14"), which defers the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of adopting this new standard on its financial statements and the method of adoption.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases: Topic 842 ("ASU 2016-02"), which provides updated guidance on lease accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted. The Company is evaluating the impact of adopting this new standard on its financial statements.

8

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation-Stock Compensation: Topic 718 ("ASU 2016-09"), which provides updated guidance on several aspects of the accounting for share-based payment transactions. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this guidance on January 1, 2017 and is evaluating the impact of this guidance on its financial statements.

3. Investments and Fair Value Disclosures

Investments in Marketable Securities

Marketable securities that the Company does not intend to hold to maturity are classified as available-for-sale, are carried at fair value and are included on the Company’s balance sheet as either short-term or long-term investments depending on their maturity. Investments with original maturities greater than three months that mature less than one year from the consolidated balance sheet date are classified as short-term investments. Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments. Available-for-sale investments are marked-to-market at the end of each reporting period, with unrealized holding gains or losses, which represent temporary changes in the fair value of the investment, reflected in accumulated other comprehensive loss, a separate component of stockholders’ equity. The Company’s primary objective when investing excess cash is preservation of principal. The following table summarizes the Company’s investments:

	September 30, 2016
	Contracted Maturity	Carrying Value
		(in thousands)
Money market funds	demand	$	43,405
Total cash equivalents		$	43,405
U.S. agency notes	70 - 365 days	$	59,706
Commercial paper	25 - 62 days	16,678
Corporate bonds	19 - 348 days	69,462
Asset-backed securities	199 days	3,508
Total short-term investments		$	149,354
U.S. agency notes	380 - 562 days	$	84,212
Corporate bonds	370 - 572 days	33,595
Total long-term investments		$	117,807

The following table summarizes the Company's investments at September 30, 2016 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	143,893	$	53	$	(28	)	$	143,918
Commercial paper	16,678		—		—			16,678
Corporate bonds	102,901		186		(30		)	103,057
Asset-backed securities	3,504		4		—			3,508
Total investments	$	266,976	$	243	$	(58	)	$	267,161

9

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table summarizes the Company's investments at December 31, 2015 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	83,977	$	—	$	(334	)	$	83,643
Corporate bonds	91,537		2		(266		)	91,273
Total investments	$	175,514	$	2	$	(600	)	$	174,916

Fair Value

The following table summarizes the carrying and fair value of the Company’s financial assets (in thousands):

	September 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Cash equivalents*	$	43,405	$	43,405	$	123,170	$	123,170
Short and long-term investments	267,161		267,161		174,916		174,916
Total assets	$	310,566	$	310,566	$	298,086	$	298,086

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

The carrying amounts of the Company’s other financial instruments, accounts receivable, accounts payable and accrued expenses, approximate their respective fair values due to their short-term nature. (See Note 8 Borrowings for additional information on the fair value of debt.)

The Company uses a three-tier fair value measurement hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The three tiers are defined as follows:

• Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical instruments and include the Company’s investments in money market funds and certificates of deposit;

• Level 2. Inputs valued using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data and include the Company’s investments and marketable securities in U.S. agency notes, commercial paper, corporate bonds and asset-backed securities; and

• Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

10

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Assets Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. This determination requires significant judgments to be made. There were no transfers between classification levels during the periods. The following tables summarize the values (in thousands):

	September 30, 2016		Level 1		Level 2		Level 3
Money market funds	$	43,405	$	43,405	$	—	$	—
Total cash equivalents*	43,405		43,405		—		—
U.S. agency notes	143,918		—		143,918		—
Commercial paper	16,678		—		16,678		—
Corporate bonds	103,057		—		103,057		—
Asset-backed securities	3,508		—		3,508		—
Total investments	267,161		—		267,161		—
Total cash equivalents and investments	$	310,566	$	43,405	$	267,161	$	—
	December 31, 2015		Level 1		Level 2		Level 3
Money market funds	$	123,170	$	123,170	$	—	$	—
Total cash equivalents*	123,170		123,170		—		—
U.S. agency notes	83,643		—		83,643		—
Corporate bonds	91,273		—		91,273		—
Total investments	174,916		—		174,916		—
Total cash equivalents and investments	$	298,086	$	123,170	$	174,916	$	—

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets, including property and equipment, goodwill and intangible assets, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be impaired. During the nine months ended September 30, 2016 and 2015, there were no assets or liabilities measured at fair value on a nonrecurring basis after initial recognition.

4. Acquisitions

Transera Communications, Inc.

On February 4, 2016, the Company completed its acquisition of all of the stock of Transera Communications, Inc. ("Transera"), which was renamed BroadSoft Contact Center, Inc. Transera provides cloud-based contact center software and the acquisition enables the Company to offer its customers a comprehensive cloud contact center solution that is complementary to, and integrates with, its BroadWorks and BroadCloud platform. The total consideration paid for Transera was $19.8 million, which was funded with cash on hand. The Company incurred $0.5 million of transaction costs for financial advisory and legal services related to the acquisition, which costs are included in general and administrative expenses as incurred, in the Company’s condensed consolidated statements of operations.

The condensed consolidated financial statements include the results of Transera from the date of acquisition. The purchase price has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.

11

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date of February 4, 2016 (in thousands):

Cash and cash equivalents	$	365
Accounts receivable	1,623
Prepaid and other assets	285
Property and equipment	155
Deferred tax assets	3,495
Trade name	160
Customer relationships	4,100
Developed technology	3,050
Goodwill	7,826
Deferred revenue	(111		)
Accounts payable and accrued expenses	(1,148		)
Total consideration	$	19,800

The trade name represents the fair value of the Transera trade name that the Company intends to use for a fixed period of time. Customer relationships represent the fair value of the underlying relationships and agreements with Transera customers. Developed technology represents the fair value of Transera's intellectual property. The trade name, customer relationships and developed technology are being amortized on a straight-line basis over a period of three years, seven years and five years, respectively, which in general reflects the estimated cash flows to be generated from such assets. The weighted-average amortization period for depreciable intangible assets acquired is approximately six years.

The excess of purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired of $7.8 million was recorded as goodwill. The goodwill balance is attributable to the assembled workforce and the synergies expected as a result of the acquisition. In accordance with U.S. GAAP, goodwill associated with this acquisition will not be amortized but will be tested for impairment on an annual basis. Goodwill associated with this acquisition is not deductible for tax purposes.

Pro Forma Financial Information for Acquisition of Transera (unaudited)

Transera contributed revenue of $5.7 million and a net loss of $2.8 million for the period from the date of acquisition to September 30, 2016.

The unaudited pro forma statement of operations data below gives effect to the acquisition of Transera as if it had occurred on January 1, 2015. The following data includes adjustments for amortization of intangible assets and acquisition costs. This pro forma data is presented for information purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place on January 1, 2015.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenue	$	85,326		$	71,597		$	240,183		$	196,388
Net loss	(179		)	(3,909		)	(4,693		)	(12,677		)
Net loss per share:
Basic	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)
Diluted	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)

12

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

5. Goodwill

The following table provides a summary of the changes in the carrying amounts of goodwill (in thousands):

Balance as of December 31, 2015	$	72,275
Increase in goodwill related to acquisitions	8,604
Other	(1,169		)
Balance as of September 30, 2016	$	79,710

The increase in goodwill related to acquisitions consists of $7.8 million of goodwill related to the acquisition of Transera in February 2016, $1.0 million of goodwill related to the acquisition of an enterprise messaging-based team communication and collaboration software application company in May 2016 and a $(0.2) million measurement period adjustment related to a cloud-based communications provider in Japan acquired in November 2015. Any change in the goodwill amounts resulting from foreign currency translations are presented as “Other” in the above table.

6. Deferred Revenue

Deferred revenue represents amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue is expected to be recognized as revenue within 12 months from the balance sheet date. Deferred revenue consisted of the following (in thousands):    

	September 30, 2016		December 31, 2015
License software	$	19,476	$	33,200
Subscription and maintenance support	58,154		61,399
Professional services and other	24,419		16,455
Total	$	102,049	$	111,054
Current portion	$	96,034	$	106,483
Non-current portion	6,015		4,571
Total	$	102,049	$	111,054

7. Software Licenses

The Company has entered into an agreement with a third-party that provides the Company the right to distribute its software on an unlimited basis through December 2020.

For the period from June 2012 to May 2016, the Company had a fixed cost associated with these distribution rights of $10.2 million, which was amortized to cost of revenue over the four-year period beginning in June 2012, based on the straight line method.

For the period from June 2016 to December 2020, the Company has a fixed cost associated with these distribution rights of $17.3 million, and to the extent billed license software revenue over the extended term exceeds $850 million, the Company would be required to pay additional fees. The $17.3 million is being amortized to cost of revenue over the extended term beginning June 2016, based on the straight line method.

Amortization expense related to this agreement was $0.9 million and $0.6 million for the three months ended September 30, 2016 and 2015, respectively and $2.3 million and $1.9 million for the nine months ended September 30, 2016 and 2015, respectively.

8. Borrowings

2022 Convertible Senior Notes

In September 2015, the Company issued $201.3 million aggregate principal amount of 1.00% convertible senior notes due in 2022 (the “2022 Notes”). The 2022 Notes are general unsecured obligations of the Company, with interest payable semi-annually in cash at a rate of 1.00% per annum, and will mature on September 1, 2022, unless earlier converted, redeemed or repurchased.

The 2022 Notes may be converted by the holders at their option on any day prior to the close of business on the business day immediately preceding June 1, 2022 only under the following circumstances: (a) during any calendar quarter commencing after the calendar quarter ended on December 31, 2015 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending

13

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (b) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price, as defined in the indenture governing the 2022 Notes (the "2022 Indenture"), per $1,000 principal amount of 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (c) if the Company calls any or all of the 2022 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant redemption date; or (d) upon the occurrence of specified corporate events.The 2022 Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, June 1, 2022 through the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate for the 2022 Notes is 25.8249 shares of the Company’s common stock per $1,000 principal amount of 2022 Notes, equivalent to a conversion price of approximately $38.72 per share of common stock. The conversion rate will be subject to adjustment in some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption on or after September 1, 2019 as described below, the Company will increase the conversion rate for a holder who elects to convert its 2022 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election. It is the Company's current intent to settle conversions through combination settlement with a specified dollar amount per $1,000 principal amount of 2022 Notes of $1,000. While the 2022 Notes were not convertible as of September 30, 2016, if the 2022 Notes were convertible, shares would have been distributed upon conversion because the conversion price was below the stock price as of such date.

Holders of the 2022 Notes may require the Company to repurchase some or all of the 2022 Notes for cash upon a fundamental change, as defined in the 2022 Indenture, at a repurchase price equal to 100% of the principal amount of the 2022 Notes being repurchased, plus any accrued and unpaid interest up to, but excluding, the relevant repurchase date.

The Company may not redeem the 2022 Notes prior to September 1, 2019. Beginning September 1, 2019, the Company may redeem for cash all or a portion of the 2022 Notes, at the Company's option, if the last reported sale price of the common stock is equal to or greater than 140% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within the five trading days immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2022 Notes.

The Company has separately accounted for the liability and equity components of the convertible debt instrument by allocating the gross proceeds from the issuance of the 2022 Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. This interest rate, estimated at 7.4%, was used to compute the initial fair value of the liability component of $131.3 million. The excess of the gross proceeds received from the issuance of the 2022 Notes over the initial amount allocated to the liability component of $70.0 million was allocated to the embedded conversion option, or equity component. This excess is reported as a debt discount and will be subsequently amortized as interest expense, using the interest method, through September 2022, the maturity date of the 2022 Notes. Offering costs, consisting of the initial purchasers’ discount and offering expenses payable by the Company, were $6.4 million. These offering costs were allocated to the liability component and the equity component based on the relative valuations of such components. As a result, $4.2 million of the offering costs were classified as debt issuance costs and recorded on the balance sheet as a deduction from the carrying amount of the debt liability. The remaining $2.2 million of offering costs were allocated to the equity component.

The fair value of the 2022 Notes as of September 30, 2016 and December 31, 2015 was $266.6 million and $221.1 million, respectively. The carrying amount of the equity component of the 2022 Notes was $61.6 million at September 30, 2016. The unamortized offering costs classified as debt issuance costs and recorded as a direct deduction to the carrying amount of the debt liability at September 30, 2016 were $3.6 million, which are being amortized as interest expense through the September 2022 maturity date of the 2022 Notes.

2018 Convertible Senior Notes

In June 2011, the Company issued $120.0 million aggregate principal amount of 1.50% convertible senior notes due in 2018 (the “2018 Notes”). The 2018 Notes are senior unsecured obligations of the Company, with interest payable semi-annually in cash at a rate of 1.50% per annum, and will mature on July 1, 2018, unless earlier repurchased, redeemed or converted.

Concurrently with the closing of the 2022 Notes offering, the Company repurchased $50.9 million principal amount of the 2018 Notes in privately negotiated transactions for an aggregate purchase price of $53.4 million. The Company recorded an extinguishment loss of $4.2 million on the repurchase, including $0.5 million associated with unamortized issuance costs. This

14

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

loss was recorded in other expense within the consolidated statement of operations. The remaining purchase price was allocated between the liability component and the equity component based upon the fair value of the debt immediately prior to the repurchase at $42.4 million and $6.8 million, respectively.

The 2018 Notes may be converted by the holders at their option on any day prior to the close of business on the scheduled trading day immediately preceding April 1, 2018 only under the following circumstances: (a) during the five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the trading price per 2018 Note for each day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such day; (b) during any calendar quarter (and only during such quarter) after the calendar quarter ended June 30, 2012, if the last reported sale price of the common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (c) upon the occurrence of specified corporate events; or (d) if the Company calls the 2018 Notes for redemption. The 2018 Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, April 1, 2018 through the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate for the 2018 Notes is 23.8126 shares of the Company’s common stock per $1,000 principal amount of 2018 Notes, equivalent to a conversion price of approximately $41.99 per share of common stock. The conversion price will be subject to adjustment in some events, but will not be adjusted for accrued interest. In addition, if a make-whole fundamental change, as defined in the indenture governing the 2018 Notes (the “2018 Indenture”), occurs prior to the maturity date, the Company will in some cases increase the conversion rate for a holder that elects to convert its 2018 Notes in connection with such make-whole fundamental change. Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2018 Notes to be converted and deliver shares of the common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the 2018 Notes being converted. While the 2018 Notes were not convertible as of September 30, 2016, if the 2018 Notes were convertible, shares would have been distributed upon conversion because the conversion price was below the stock price as of such date.

Holders of the 2018 Notes may require the Company to repurchase some or all of the 2018 Notes for cash, subject to certain exceptions, upon a fundamental change, as defined in the 2018 Indenture, at a repurchase price equal to 100% of the principal amount of the 2018 Notes being repurchased, plus any accrued and unpaid interest up to but excluding the relevant repurchase date.

Beginning July 1, 2015, the Company may redeem for cash all or part of the 2018 Notes (except for the 2018 Notes that the Company is required to repurchase as described above) if the last reported sale price of the common stock exceeds 140% of the applicable conversion price for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day immediately prior to the date of the redemption notice. The redemption price will equal the sum of 100% of the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, plus a “make-whole premium” payment. The Company must make the make-whole premium payments on all 2018 Notes called for redemption prior to the maturity date, including 2018 Notes converted after the date the Company delivered the notice of redemption.

The Company has separately accounted for the liability and equity components of the convertible debt instrument by allocating the gross proceeds from the issuance of the 2018 Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. This interest rate, estimated at 8%, was used to compute the initial fair value of the liability component of $79.4 million. The excess of the gross proceeds received from the issuance of the 2018 Notes over the initial amount allocated to the liability component, of $40.6 million, was allocated to the embedded conversion option, or equity component. This excess is reported as a debt discount and subsequently amortized as interest expense, using the interest method, through July 2018, the maturity date of the 2018 Notes. Offering costs, consisting of the initial purchasers’ discount and offering expenses payable by the Company, were $4.3 million. These offering costs were allocated to the liability component and the equity component based on the relative valuations of such components. As a result, $2.9 million of the offering costs were classified as debt issuance costs and recorded on the balance sheet in other assets. The remaining $1.4 million of offering costs were allocated to the equity component.

The fair value of the 2018 Notes as of September 30, 2016 and December 31, 2015 was $84.3 million and $75.3 million, respectively. The carrying amount of the equity component of the 2018 Notes was $7.0 million at September 30, 2016. The unamortized offering costs classified as debt issuance costs and recorded as a direct deduction to the carrying amount of the debt liability at September 30, 2016 were $0.4 million, which is being amortized as interest expense through the July 2018 maturity date of the 2018 Notes.

15

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table shows the amounts recorded within the Company’s financial statements with respect to the combined 2022 Notes and the 2018 Notes (collectively, the "Notes") (in thousands):

	September 30, 2016			December 31, 2015
Convertible debt principal	$	270,355		$	270,355
Unamortized debt discount	(68,637		)	(77,440		)
Unamortized debt issuance costs	(3,959		)	(4,584		)
Net carrying amount of convertible debt	$	197,759		$	188,331

The following table presents the interest expense recognized related to the Notes (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Contractual interest expense	$	762	$	523	$	2,310	$	1,423
Amortization of debt issuance costs	208		610		625		813
Accretion of debt discount	2,989		1,715		8,803		4,628
Net interest expense	$	3,959	$	2,848	$	11,738	$	6,864

The fair value for the Company’s borrowings is estimated using quoted market prices of the Notes at September 30, 2016, quoted market prices for similar instruments and by observable market data. The Company believes its creditworthiness and the financial market in which it operates have not materially changed since entering into the arrangements. If measured at fair value in the financial statements, long-term debt would be classified as Level 2 in the fair value hierarchy.

The aggregate maturities of borrowings as of September 30, 2016 were as follows (in thousands):

2016 - 2017	$	—
2018	69,105
2019	—
2020 and thereafter	201,250
	$	270,355

9. Stock-based Compensation

Equity Incentive Plans

In 1999, the Company adopted the 1999 Stock Incentive Plan (the “1999 Plan”). The 1999 Plan provided for the grant of incentive stock options, nonqualified stock options, restricted stock awards and stock appreciation rights. The 1999 Plan terminated in June 2009 whereby no new options or awards are permitted to be granted. In April 2009, the Company adopted the 2009 Equity Incentive Plan. This plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units (“RSUs”) and stock appreciation rights. In June 2010, in connection with the Company’s initial public offering (“IPO”), the 2009 Equity Incentive Plan was amended and restated to provide for, among other things, annual increases in the share reserve (as amended and restated, the “2009 Plan”).

The term of stock-based grants is up to ten years, except that certain stock-based grants made after 2005 have a term of five years. For grants made under the 2009 Plan prior to January 1, 2015, the requisite vesting period is typically four years and for grants made subsequent to January 1, 2015, the requisite vesting period is typically three years. On each of January 1, 2015 and 2016, 1,250,000 shares were added to the 2009 Plan. At September 30, 2016, the Company had 794,538 shares of common stock available for issuance under the 2009 Plan.

16

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-based compensation expense recognized by the Company was as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016		2015
Stock options	$	2,009	$	2,212		$	6,156	$	5,563
Restricted stock units	11,365		8,043			30,930		24,032
Performance stock units	647		(1,098		)	1,221		792
Total recognized stock-based compensation expense	$	14,021	$	9,157		$	38,307	$	30,387

Stock Options

The following table presents summary information related to stock options:

	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2015	1,998,875		$	29.48
Granted	483,450		35.66
Exercised	(428,424	)	32.36
Forfeited	(130,530	)	32.26
Expired	(10,373	)	32.84
Balance, September 30, 2016	1,912,998		$	30.18	7.36	$31,317
Vested and Exercisable, September 30, 2016	900,953		$	27.27	5.69	$17,375

During the nine months ended September 30, 2016 and 2015, the Company granted stock options with a weighted-average grant date fair value of $16.14 and $15.73, respectively. For the nine months ended September 30, 2016 and 2015, the intrinsic value of stock options exercised was $4.3 million and $3.7 million, respectively, and cash received from stock options exercised was $13.9 million and $3.0 million, respectively.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested stock options was $13.6 million, which is scheduled to be recognized over a weighted average period of 1.94 years. To the extent the actual forfeiture rate is different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Restricted Stock Units

The following table presents a summary of activity for RSUs (excluding RSUs that are subject to performance-based vesting conditions (“PSUs”)):

	Number of RSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	1,512,022		$	33.19
Granted	1,444,344		38.04
Vested	(803,246	)	34.02
Forfeited	(93,703	)	34.60
Balance, September 30, 2016	2,059,417		$	36.23

17

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The RSUs generally vest over three or four years from the vesting commencement date and on vesting the holder receives one share of common stock for each RSU.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested RSUs was $61.0 million, which is scheduled to be recognized over a weighted average period of 1.97 years. To the extent the actual forfeiture rate is different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Performance Stock Units

The following table presents a summary of activity for PSUs:

	Number of PSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	550,088		$	26.87
Granted	—		—
Vested	(75,463	)	32.96
Forfeited	(1,641	)	23.72
Balance, September 30, 2016	472,984		$	25.91

The PSUs generally vest over three or four years from the vesting commencement date, subject to the satisfaction of certain performance conditions, and on vesting the holder receives one share of common stock for each PSU.

During the three months ended September 30, 2015, the Company reversed $1.4 million of expense related to the change in estimate of the number of shares expected to vest based upon the satisfaction of certain financial performance conditions.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested PSUs was $0.2 million, which is scheduled to be recognized over a weighted average period of 0.66 years. To the extent the actual forfeiture rate or estimated financial performance conditions are different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Tax Benefits

In accordance with the FASB’s guidance on stock-based compensation, the Company elected the alternative transition method (short cut method) provided for calculating the tax effects of stock-based compensation. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows related to the tax effect of employee stock-based compensation awards that are outstanding upon adoption. As of September 30, 2016, the balance of the Company’s APIC pool related to tax windfall benefits from stock option exercises was $10.9 million.

The Company applies a with-and-without approach in determining its intra-period allocation of tax expense or benefit attributable to stock-based compensation deductions. Tax deductions in excess of previously recorded benefits (windfalls) included in net operating loss carryforwards but not reflected in deferred tax assets were $53.5 million and $50.4 million at September 30, 2016 and December 31, 2015, respectively.

10. Commitments and Contingencies

In the normal course of business, the Company enters into contracts and agreements that may contain representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made in the future, but have not yet been made. The Company has not paid any material claims related to indemnification obligations to date.

In accordance with its bylaws and certain agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date under these indemnification obligations.

18

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In addition, the Company is involved in litigation incidental to the conduct of its business. The Company is not a party to any lawsuit or proceeding that, in the opinion of management, is reasonably possible to have a material adverse effect on its financial position, results of operations or cash flows.

11. Taxes

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate on a consolidated basis in accordance with the accounting guidance for income taxes. Where the Company has entities with losses and does not expect to realize the tax benefits in the foreseeable future, those entities are excluded from the effective tax rate calculation. Non-recurring and discrete items that impact tax expense are recorded in the period incurred.

The effective tax rate was 33.7% and 31.6% for the nine months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, the effective tax rate differs from the computed U.S. statutory rate primarily due to nondeductible expenses related to stock-based compensation, other compensation items and losses from certain foreign jurisdictions with no associated tax benefit due to a full valuation allowance, partially offset by research and development and business credits. Included in the effective tax rate for the nine months ended September 30, 2016 is a discrete benefit of $2.1 million related to additional U.S. research and development credits claimed for the prior years.

As of September 30, 2016, the Company has not recorded a deferred tax liability for undistributed earnings of $10.8 million of certain foreign subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed, the Company would be subject to federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets in each relevant jurisdiction. The Company provides a valuation allowance against deferred tax assets if, based upon the weight of available evidence, we do not believe it is “more-likely-than-not” that some or all of the deferred tax assets will be realized. Realization of deferred tax assets in any jurisdictions depends on various factors, including the expectation of future profitability in that jurisdiction.

Realization of the U.S. deferred tax asset is dependent on generating sufficient taxable income prior to expiration of these U.S. loss carryforwards.  During the prior years and currently, the Company experienced losses in its U.S. jurisdiction, driven largely by significant stock-based compensation expense recorded in those years. Although realization is not assured, management believes it is more-likely-than-not that the results of U.S. operations will generate sufficient taxable income to support the realization of the existing deferred tax asset and any excess stock-based compensation deduction carryforwards prior to the expiration of those losses. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

12. Income (loss) per share data

Basic income per common share is computed based on the weighted average number of outstanding shares of common stock. Diluted income per common share adjusts the basic weighted average common shares outstanding for the potential dilution that could occur if stock options, RSUs and convertible securities were exercised or converted into common stock.

The following table presents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation. In the table below, net loss represents the numerator and weighted average common shares outstanding represent the denominator:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
Weighted average common shares outstanding, basic and diluted	29,878			29,322			29,491			29,182
Net loss per share, basic and diluted	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)

Due to the settlement features of the Notes, the Company only includes the impact of the premium feature in the diluted earnings per common share calculation when the average stock price exceeds the conversion price of the Notes. The weighted average number of shares outstanding used in the computation of diluted loss per share does not include the effect of the premium feature of the 2022 Notes convertible into 686,211 and 167,570 shares for the three and nine months ended September 30,2016, respectively, and does not include the effect of the premium feature of the 2018 Notes convertible into 96,636 share for the three months ended September 30, 2016, as the effect would have been anti-dilutive given the Company's loss for these

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

periods. The average stock price did not exceed the conversion price for the 2022 Notes for the three and nine months ended September 30,2015 or exceed the conversion price for the 2018 Notes for the nine months ended September 30,2016 and the three and nine months ended September 30,2015.

The weighted average number of shares outstanding used in the computation of diluted loss per share does not include the effect of stock-based awards convertible into 923,561 and 508,377 shares for the three months ended September 30, 2016 and 2015, respectively, and into 888,171 and 633,990 shares for the nine months ended September 30, 2016 and 2015, respectively, as the effect would have been anti-dilutive given the Company’s losses for these periods.

The weighted average number of shares outstanding used in the computation of diluted loss per share also does not include the effect of certain additional stock-based awards exercisable into 265,546 and 1,488,820 shares for the three months ended September 30, 2016 and 2015, respectively, and into 1,090,717 and 1,606,984 shares for the nine months ended September 30, 2016 and 2015, respectively, as their effect would have been anti-dilutive because their exercise prices exceeded the average market price of the Company's common stock during these periods.

13. Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its chief executive officer (the “CEO”). The CEO reviews financial information presented on a consolidated basis, along with information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. Discrete information on a geographic basis, except for revenue, is not provided below the consolidated level to the CEO. The Company has concluded that it operates in one segment and has provided the required enterprise-wide disclosures.

The Company engages in business across three geographic regions: North America; Europe, Middle East and Africa ("EMEA"); and Asia Pacific, the Caribbean and Latin America ("Emerging Markets"). Revenue by geographic area is based on the location of the service provider. The following tables present revenue and long-lived assets, net, by geographic area (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Revenue:
North America	$	46,696	$	40,028	$	132,545	$	114,319
EMEA	23,531		16,625		68,000		48,194
Emerging Markets	13,895		12,444		38,434		26,739
Total Revenues	$	84,122	$	69,097	$	238,979	$	189,252

North America includes $38.5 million and $36.9 million of United States revenue for each of the three months ended September 30, 2016 and 2015 and $119.4 million and $107.9 million for each of the nine months ended September 30, 2016 and 2015.

	September 30, 2016		December 31, 2015
Long-Lived Assets, net
North America	$	20,671	$	21,135
EMEA	2,742		5,008
Emerging Markets	3,704		1,171
Total Long-Lived Assets, net	$	27,117	$	27,314

North America includes $20.3 million and $20.9 million of United States long-lived assets as of September 30, 2016 and December 31, 2015.

14. Subsequent Events

On October 28, 2016, the Company completed its acquisition of all of the outstanding units of VoIP Logic, LLC, a wholesale provider of BroadWorks-based cloud communications services. This cloud offering will be added to the Company's BroadCloud portfolio and addresses the needs of service providers who want greater control of their platform and to maintain their own administrative systems. The total consideration paid for VoIP Logic was $13.4 million, funded with cash on hand. The Company has not yet allocated the purchase price to the acquired assets and liabilities.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission, or SEC, on February 29, 2016.

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions. Forward-looking statements in this Quarterly Report on Form 10-Q may include statements about:

• our dependence on the success of BroadWorks;

• our ability to continue to develop, and to successfully deploy, our BroadCloud offering, expand this offering geographically and increase the associated recurring service revenue;

• any potential loss of or reductions in orders from certain significant customers;

• our dependence on our service provider customers to sell services using our applications;

• claims that we infringe the intellectual property rights of others;

• our ability to protect our intellectual property;

• competitive factors, including, but not limited to, industry consolidation, entry of new competitors into our market, and new product and marketing initiatives by our competitors;

• our ability to predict our revenue, operating results and gross margin accurately;

• the length and unpredictability of our sales cycles;

• our ability to expand our product offerings;

• our international operations, including foreign currency exchange risk;

• our significant reliance on distribution partners in international markets;

• our ability to manage our growth, including our increased headcount;

• the attraction and retention of qualified employees and key personnel;

• the interoperability of our products with service provider networks;

• our ability to realize the benefits of our recent acquisitions and the successful integration of the personnel, technologies, and customers from such acquisitions;

• the quality of our products and services, including any undetected errors or bugs in our software; and

• our ability to maintain proper and effective internal controls.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including those factors we discuss in the “Risk Factors” sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and in our other filings with the SEC. You should read these factors and the other cautionary statements made in this Quarterly Report on Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. These risks are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are based on reasonable assumptions, we can give no assurance we will attain these expectations or that any deviations will not be material. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Overview

We are the leading global provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based Unified Communications, or UC, to their enterprise customers.

Traditionally, many enterprises have utilized premise-based private branch exchanges, or PBX’s, to connect their offices and people to public telephony networks. Hosted UC enables the delivery of PBX features without the need for premise-based equipment. Hosted UC can be delivered through service providers using their own internet protocol, or IP-based networks and their mobile networks, as well as over the public internet (also known as "over the top" or OTT). In addition to voice telephony, UC offers additional features such as full integration with mobile devices, high definition, or HD, voice and video calling and conferencing, instant messaging and presence, or IM&P, and web collaboration.

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We believe we are well positioned to enable service providers to capitalize on increasing demand by enterprises for such UC services by enabling them to efficiently and cost-effectively offer a broad suite of services to their end-users. Our service provider customers, who are located in more than 80 countries, are delivering services and have deployed over 13 million UC subscriber lines worldwide using our software. We count among our customers 25 of the top 30 telecommunications service providers globally, as measured by revenue for the year ended December 31, 2015.

UC-One

UC-One, our UC solution, is a communications and collaboration offering that enables telecommunications service providers to offer businesses and other enterprises UC features and functionalities on a hosted basis without the need for traditional premise-based PBX equipment. Our technology is designed to meet service providers’ stringent requirements for service availability, network integration and scale and to address the needs of various business segments, such as micro, small, medium and large enterprises; market segments such as hospitality, government, education, contact centers and healthcare; and industries requiring call center functionality.

Our UC-One services include HD voice and video calling, audio conferencing, IM&P, desktop sharing and collaboration and call center capabilities. Because these capabilities can be accessed through desk phones, smartphones, tablets, laptops and PCs, UC-One provides full support for today’s distributed workforce and mobile employees. Our solution can also be deployed across multiple access networks and technologies, including fixed line/fiber and traditional mobile 3G networks, as well as voice over LTE, or VoLTE, networks and voice over wifi, or VoWiFi.

The benefits of UC-One to enterprises and end users include:

• Solution Breadth and Flexibility. UC-One is scalable and can be used by businesses of varying sizes, from very small businesses of two employees to the largest global enterprises with hundreds of thousands of employees in multiple locations. Capacity can be purchased as needed by enterprises in response to business and operational needs.

• Multi-Location and Ease of Use. Because UC-One is cloud and IP-based, an enterprise can provide uniform communications functionality across its entire organization, enabling a consistent and simplified user experience. It also provides a single console to manage all the communication and collaboration needs for businesses with geographically dispersed offices and mobile workers, greatly streamlining business operations and reducing operational costs.

• Enhanced Mobility. Our solution provides the flexibility to work from the office, at home or on the move, with the full range of UC-One services available irrespective of location or end user device.

• Business Continuity. Because UC-One is cloud-based, in the event an enterprise has a business interruption issue, the enterprise’s core communications and collaboration services would remain unaffected.

• Openness. We have an active ecosystem of development partners who use our open APIs to create complementary offerings designed for specific market segments or industry verticals.

• Lower Total Cost of Ownership. We believe that enterprises will experience a lower total cost of ownership compared to legacy premise-based solutions. Because it is cloud-based, there are significantly lower capital investment requirements, fewer highly trained personnel required and reduced costs given the inherent flexibility of per-user based costs.

We offer service providers two deployment options, software and software-as-a-service, or SaaS, to enable them to offer UC services to their enterprise customers:

Software. BroadWorks is our application server software offering, with the software generally deployed on industry-standard servers located in the service provider’s data centers. With BroadWorks implemented as an application server in its infrastructure, the service provider is responsible for the development and implementation of the overall solution and integration with the service provider’s network, operations, support and billing systems. This deployment model gives the service provider the maximum flexibility to define its UC-One offering. In this model, revenue is derived from perpetual software license and annual maintenance and support fees, as well as associated professional services. Since our inception, the majority of our revenue has been derived from such software licensing.

SaaS. The second deployment option is our BroadCloud SaaS offering. BroadCloud provides a managed services offering for service providers. In this model, we have implemented UC-One and other BroadWorks capabilities within our own data centers and provide operations capabilities covering sales and order management, service delivery, device provisioning, customer service and billing. We believe that through BroadCloud, service providers can accelerate their deployments of UC-One services and reduce their capital expenditures and the internal costs of implementing UC services. Generally, service providers

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utilizing our BroadCloud offering pay us on a monthly recurring basis based on the total number of subscriber lines the service provider has deployed.

Other Products

We also offer to our service provider customers SIP Trunking and Voice over IP, or VoIP, consumer solutions based on our BroadWorks software.

SIP Trunking. Our BroadWorks’ SIP Trunking solution enables service providers to provide IP interconnectivity and additional services to enterprises that already have premise-based PBXs. With SIP Trunking, service providers are able to bundle voice and data over a single converged IP pipe, creating a more economical offering than can be achieved with separate voice and data connections. We believe our solution enables service providers to differentiate their SIP Trunking service offerings and increase revenue by offering enhanced services such as UC, video, mobility, global four-digit dialing and business continuity.

BroadSoft Consumer Applications. Our consumer IP applications allow service providers to offer consumers voice and multimedia telephony services with voice calling, video calling, enhanced messaging and content sharing over broadband and VoLTE networks.

Company

We were incorporated in Delaware in 1998 and we began selling BroadWorks in 2001. We sell our products to service providers both directly and indirectly through distribution partners, such as telecommunications equipment vendors, value-added resellers, or VARs, and other distributors.

Industry

Traditionally, many enterprises have used premise-based PBX’s to connect their offices and people to the public telephone network. These PBX offerings were primarily voice communications based. We believe several trends are driving enterprises of all sizes to embrace the change from premise-based to cloud-based delivery of PBX functionality:

• The increasing demand by enterprises to move business applications to the cloud for operational savings, flexibility and expanded services;

• The desire by enterprises to drive greater team collaboration and workplace productivity through communications and collaboration tools;

• The demand by enterprises to offer broader communications services such as HD voice and video calling and conferencing across their organizations;

• The increasingly distributed nature of enterprises’ operations and workforces and the desire to provide fully integrated UC to them;

• The proliferation of mobile devices used by employees and other workers; and

• The rapid expansion of high quality IP bandwidth, particularly the expansion of wireless bandwidth such as Wi-Fi and VoLTE.

We believe that service providers are well-positioned to address these market demands. A number of our service provider customers have made significant investments in their IP-based and mobile networks and are already offering standard communications services such as broadband access and fixed and mobile calling plans. Many have a long track record of reliably delivering these business critical services. We believe that as UC solutions are increasingly being offered over fixed-

line and mobile networks, service providers can achieve significant competitive advantages in delivering such services over their networks. Further, we believe service providers have a significant incentive to offer UC services to their enterprise customers as competitive and regulatory pressures have commoditized their historical revenue streams.

In addition, we believe that larger service providers are becoming more focused on implementing transformations of their fixed and mobile networks from traditional circuit switched networks to their IP-based broadband networks. As these service providers embark on such projects, they are incorporating application servers like BroadWorks to enable them to offer enhanced business services that were previously offered over their circuit switched networks. We believe this emerging trend is evident in both fixed-line transformations and increasingly in service providers’ investment in their mobile VoLTE networks. We believe this trend is a positive development for us, as service providers both replace services to their business users on their traditional networks and provide new business services.

Our Strategy

Our goal is to strengthen our position as the leading provider of software and services that enable service providers to deliver cloud-based UC to their enterprise customers. To achieve this goal, our strategy is to deliver an increasingly feature rich set of services to address the needs of a broader spectrum of business customer types. Key elements of our strategy include:

• Extend our technology leadership and product depth and breadth. We intend to continue to provide industry leading UC solutions through product innovation and substantial investment in research and development for new features, applications and services.

• Accelerate the adoption of UC solutions by providing communications centric UC and collaboration capabilities. Project Tempo is our vision of extending UC to help drive how enterprises and people communicate, interact and collaborate by integrating their communication and collaborative tools with contextual intelligence. We also intend to accelerate UC adoption and our service provider customers’ time to market by promoting and expanding our UC offerings. Our BroadCloud solution enables our service providers to offer UC features and functions through a service offering that we host and manage. We also intend to expand the geographic availability of our BroadCloud offerings beyond the United States, United Kingdom, Germany, Japan and France.

• Broaden demand by enterprises and assist our service provider customers by developing more market segment directed UC offerings. We enable service providers to develop UC offerings targeted towards specific business segments, including small, medium and large enterprises and market segments such as hospitality, government, education, contact center and healthcare.

• Drive revenue growth by:

• Assisting our current service provider customers to sell more of their currently deployed BroadWorks and BroadCloud offerings. We support our service provider customers by regularly offering enhanced and new features to their current applications, as well as providing tools and training to help them market their services to subscribers.

• Expanding our BroadCloud offering. We believe that service providers will increasingly find that using our BroadCloud offering to deliver UC solutions to their customers will accelerate their time to market and product introduction cycles.

• Continuing to acquire new customers. Our customers are located around the world and include many of the top telecommunications services providers globally. We believe we are well positioned to continue to acquire new customers, particularly with the addition of our BroadCloud offering and our focus on developing UC solutions based on enterprise size and vertical market segments.

• Pursuing selected acquisitions and collaborations that complement our strategy. We intend to continue to pursue acquisitions and collaborations that we believe are strategic to strengthen our industry leadership position, expand our geographic presence or allow us to offer new or complementary products or services.

Executive Summary

Our management team monitors and analyzes a number of key industry trends and performance indicators to manage our business and evaluate our financial and operating performance.

We believe the trend towards adoption of cloud-based unified communications by enterprises will continue and even accelerate over the next several years. We also believe that service providers using our products and services are strongly positioned to

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take advantage of this demand. Our objective is to provide our service provider customers with the service and software offerings they need to effectively address this market opportunity and their end-user customer needs.

We expect continued revenue growth from our UC solutions during the remainder of 2016, which growth we believe is largely driven by increased market acceptance of hosted UC offerings and our continued market leadership. We believe converged and mobile operators desire to deliver UC solutions to their enterprise customer base to grow revenue, reduce subscriber turnover, or churn, and raise average revenue per user. Our UC-One solutions, which are either delivered through our SaaS UC offerings or through our BroadWorks server software that resides within the service provider’s network, enable service providers to rapidly and efficiently deliver a UC experience regardless of end-user device and whether or not the end-user has fixed-line or wireless access. In addition, we believe that mobile network centric UC offerings will become an increasingly important trend in the UC market, and we believe that our service provider customers are in a strong position to take advantage of this market trend. This year, major service provider customers of ours, such as Verizon Wireless, Rogers Communications and Vodafone Germany, have announced and are marketing such mobile centric offerings based on our BroadWorks platform.

During 2016, our SaaS offerings have been, and for the remainder of this year will continue to be a particularly important area of investment and marketing focus for us. Many of our service provider customers are interested in accessing the capabilities of our BroadWorks features and functions through a service offering hosted and managed by us. We believe that service providers choose our SaaS offerings to accelerate their time to market and reduce their capital and implementation costs and that delivering innovative solutions to our customers will drive our revenue growth. While our SaaS business continues to grow, we do not expect the same pace of growth during the remainder of 2016. We expect this growth rate to decline, in part due to the effects of foreign currency exchange rate fluctuations related to the United Kingdom vote to exit the European Union on our pound-denominated cloud revenue in the United Kingdom. During the remainder of 2016, we expect to continue to invest in our SaaS offerings and expand the geographic availability of these offerings.

We are expanding our UC-One capabilities by enabling enterprises and people to be more flexible and dynamically communicate, interact and collaborate by helping them integrate their communication and collaborative tools. Our goal is to enable service providers to adopt UC-One as the centerpiece in what we have entitled "The Future of Work." As an example, we are adding team (or enterprise) messaging capabilities into our UC-One communications experience, increasing the collaboration and communications capabilities of our UC-One offerings. We expect that during the remainder of 2016, we will continue our strategic investments in these and other initiatives and in research and development of existing and new products, such as client and portal software, mobility and cloud-based services, and products acquired in connection with our acquisitions.

We believe that many of the largest carriers in the world are embarking on projects to ultimately transform most, if not all, of their legacy fixed and mobile circuit switched networks to IP-based networks, driven in part by the movement to migrate their wireless networks to VoLTE. We think that we are well-positioned to meet such carrier demand for these transformation projects, especially with regard to our UC and UC for VoLTE offerings. We have achieved thus far this year, and expect to achieve during the remainder of 2016, significant positive revenue impact from these projects and believe transformation projects by certain of our largest service provider customers could drive significant growth for us over the next several years.

Key Financial Highlights

Some of our key GAAP financial highlights for the quarter ended September 30, 2016 include:

• Total revenue increased by $15.0 million or 22%, to $84.1 million, compared to $69.1 million for the quarter ended September 30, 2015;

• Gross profit was $60.4 million, or 72% of revenue, compared to $47.4 million, or 69% of revenue, for the quarter ended September 30, 2015;

• Income from operations was $1.6 million, compared to $0.8 million for the quarter ended September 30, 2015;

• Net loss was $0.6 million, compared to $3.3 million for the quarter ended September 30, 2015;

• Net loss per diluted share was $0.02, compared to $0.11 for the quarter ended September 30, 2015;

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• Billings (revenue plus net change in deferred revenue) increased by 11% to $78.9 million, compared to $71.0 million for the quarter ended September 30, 2015;

• Deferred revenue decreased by $5.3 million, compared to an increase of $2.0 million for the quarter ended September 30, 2015; and

• Cash provided by operating activities was $15.1 million, compared to $4.6 million for the quarter ended September 30, 2015.

Some of our key non-GAAP financial highlights for the quarter ended September 30, 2016 include:

• Non-GAAP gross profit increased to $64.3 million, or 76% of revenue, compared to $51.0 million, or 74% of revenue, for the quarter ended September 30, 2015;

• Non-GAAP income from operations increased to $17.3 million, or 21% of revenue, compared to $11.5 million, or 17% of revenue, for the quarter ended September 30, 2015;

• Non-GAAP net income increased to $16.4 million, or 19% of revenue, compared to $10.9 million, or 16% of revenue, for the quarter ended September 30, 2015; and

• Non-GAAP net income per diluted share increased to $0.52 per common share, compared to $0.37 per common share for the quarter ended September 30, 2015.

For a discussion of these non-GAAP financial measures and a reconciliation of GAAP and non-GAAP financial results, please refer to “Non-GAAP Financial Measures” included elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Components of Operating Results

Revenue

We derive our revenue primarily from the sale of license software, subscription and maintenance support and professional services. We recognize revenue when all revenue recognition criteria have been met in accordance with revenue recognition guidance. This guidance provides that revenue should be recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is probable.

Our total revenue consists of the following:

License software. We derive license software revenue primarily from the sale of perpetual software licenses. We generally price our software based on the packages of features and applications provided and on the number of subscriber licenses sold. These factors impact the average selling price of our licenses and the comparability of average selling prices. Our license software revenue may vary significantly from quarter to quarter or from year to year as a result of long sales and deployment cycles, variations in customer ordering practices and the application of management’s judgment in applying complex revenue recognition rules. Our deferred license software revenue balance consists of software orders that do not meet all the criteria for revenue recognition. We are unable to predict with certainty the proportion of orders that will meet all the criteria for revenue recognition relative to those orders that will not meet all such criteria and, as a result, it is difficult to forecast whether recognized license software revenue and deferred license software revenue will continue to increase or decrease in a given period. As of September 30, 2016, our deferred license software revenue balance was $19.5 million, the current portion of which was $19.3 million.

Subscription and maintenance support. Subscription and maintenance support revenue includes recurring revenue from annual maintenance support contracts for our software licenses and from subscriptions related to our delivery of SaaS offering.

Rates for maintenance support, including subsequent renewal rates, are typically established based upon a specific percentage of net license fees as set forth in the arrangement with the customer. Maintenance support revenue is recognized ratably over the maintenance support period, assuming all other revenue recognition criteria have been met. Our annual maintenance support contracts provide for software updates, upgrades and technical support. Our typical warranty on licensed software is 90 days and, during this period, our customers are entitled to receive maintenance and support without the purchase of a maintenance contract. After the expiration of the warranty period, our customers must purchase maintenance support services to continue receiving such support.

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With respect to our SaaS subscriptions, we are paid a recurring fee typically calculated based on the number of seats and type of services purchased or a usage fee based on the actual number of transactions. The recurring fee is typically billed monthly.

Our deferred subscription and maintenance support revenue balance consists of maintenance support and subscription orders that do not meet all the criteria for revenue recognition. As of September 30, 2016, our deferred subscription and maintenance support revenue balance was $58.2 million, the current portion of which was $53.0 million.

Professional services and other. Professional services and other revenue primarily includes revenue from professional service engagements consisting of implementation, training, consulting and design and customization services. Our professional services and other deferred revenue balance consists of orders that do not meet all the criteria for revenue recognition. As of September 30, 2016, our deferred professional services and other revenue balance was $24.4 million, the current portion of which was $23.6 million.

Cost of Revenue

Our total cost of revenue consists of the following:

• Cost of license software revenue. A majority of the cost of license software revenue consists of amortization of acquired intangibles, personnel-related expenses and royalties paid to third parties whose technology or products are sold as part of BroadWorks. A significant amount of the royalty fees are for the underlying embedded data base technology within BroadWorks for which we currently incur a fixed expense per quarter. Personnel-related expenses include salaries, benefits, bonuses, reimbursement of expenses and stock-based compensation. Such costs are expensed in the period in which they are incurred.

• Cost of subscription and maintenance support revenue. Cost of subscription and maintenance support revenue consists primarily of personnel-related expenses and other direct costs associated with support and maintenance obligations to our customers who have licensed our software and SaaS offerings, including maintenance and support expenses due to our use of third party software, amortization of acquired intangibles and operating and depreciation expenses associated with the delivery of SaaS offerings.

• Cost of professional services and other revenue. Cost of professional services and other revenue consists primarily of personnel-related expenses and other direct costs associated with the delivery of our professional services, which are expensed in the period in which they are incurred.

Gross Profit

Gross profit is the calculation of total revenue minus cost of revenue. Our gross profit as a percentage of revenue, or gross margin, has been, and will continue to be, affected by a variety of factors, including:

• Mix of license software, subscription and maintenance support and professional services and other revenue. We generate higher gross margins on license software revenue compared to subscription and maintenance support or professional services and other revenue.

• Growth or decline of license software revenue. A significant portion of cost of license software revenue is fixed and is expensed in the period in which it is incurred. This cost consists primarily of royalty fees to our embedded database provider and amortization of acquired technology. If license software revenue increases, these fixed fees will decline as a percentage of revenue. If license software revenue declines, these fixed fees will increase as a percentage of revenue.

• Impact of deferred revenue. If any revenue recognition criteria have not been met, the applicable revenue derived from the arrangement is deferred, including license software, subscription and maintenance support, and professional services and other revenue, until all elements of revenue recognition criteria have been met. However, the cost of revenue, including the costs of license software, subscription and maintenance support and professional services and other, is typically expensed in the period in which it is incurred. Therefore, if relatively more revenue is deferred in a particular period, gross margin would decline in that period. Because the ability to recognize revenue on orders depends largely on the terms of the sale arrangement and we are not able to predict with certainty the proportion of orders that will not meet all the criteria for revenue recognition, we cannot forecast whether any historical trends in gross margin will continue.

• Intangible amortization related to mergers and acquisitions. Over the last several years, our business combinations resulted in a number of intangibles assets. These intangible assets are amortized over their useful lives, resulting in

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additional expense impacting gross profit over the applicable period. We may undertake additional strategic transactions in the future that would result in additional intangible amortization expense.

Billings (Revenue Plus Net Change in Deferred Revenue)

We believe billings, which we calculate as revenue plus the net change in our deferred revenue balance for a particular period, is a key measure of our sales activity for that period.

Billings are as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016			2015		2016			2015
Beginning of period deferred revenue balance	$	107,305		$	107,726	$	111,054		$	101,456
End of period deferred revenue balance	102,049			109,678		102,049			109,678
Increase (decrease) in deferred revenue	(5,256		)	1,952		(9,005		)	8,222
Revenue	84,122			69,097		238,979			189,252
Billings	$	78,866		$	71,049	$	229,974		$	197,474

Operating Expenses

We grew our total headcount to 1,522 employees at September 30, 2016 from 1,247 employees at December 31, 2015, and we expect to continue hiring additional employees to support our anticipated growth.

Operating expenses consist of sales and marketing, research and development and general and administrative expenses. Salaries and other personnel costs are the most significant component of each of these expense categories. We expect our operating expenses to increase in 2016 primarily due to increases in headcount and personnel-costs, including stock-based compensation expense.

Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions, benefits and bonuses. Additional expenses include marketing programs, consulting, travel and other related overhead.

Research and development expenses. Research and development expenses consist primarily of salaries and personnel costs for development employees, including stock-based compensation, benefits and bonuses. Additional expenses include costs related to development, quality assurance and testing of new software and enhancement of existing software, consulting, travel and other related overhead. We engage third-party international and domestic consulting firms for various research and development efforts, such as software development, documentation, quality assurance and software support. We intend to continue to invest in our research and development efforts, including by hiring additional development personnel and by using third-party consulting firms for various research and development efforts. We believe continuing to invest in research and development efforts is essential to maintaining our competitive position.

General and administrative expenses. General and administrative expenses consist primarily of salary and personnel costs for administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation, benefits and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other administrative expenses.

Stock-Based Compensation

We include stock-based compensation as part of cost of revenue and operating expenses in connection with the grant of stock-based awards to our directors, employees and consultants. We apply the fair value method in accordance with authoritative guidance for determining the cost of stock-based compensation. The total cost of the grant is measured based on the estimated fair value of the award at the date of grant. The fair value of service-only awards is recognized as stock-based compensation expense on a straight-line basis over the requisite service period, which is the vesting period, of the award. The fair value of awards with a performance condition is recognized as stock-based compensation on a graded basis over the requisite vesting period of the award. For the three months ended September 30, 2016 and 2015, we recorded stock-based compensation expense of $14.0 million and $9.2 million, respectively, and for the nine months ended September 30, 2016 and 2015, we recorded stock-based compensation expense of $38.3 million and $30.4 million, respectively.

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Based on stock-based awards outstanding as of September 30, 2016, we expect to recognize future expense related to the non-vested portions of such stock-based awards in the amount of $74.8 million over a weighted average period of approximately 1.96 years.

Other Expense, Net

Other expense, net, consists primarily of interest income, interest expense, loss on repurchase of convertible senior notes and foreign exchange gains and losses. Interest income represents interest received on our cash and cash equivalents. Interest expense consists primarily of the interest related to our 2018 convertible senior notes, or the 2018 Notes, and our 2022 convertible senior notes, or the 2022 Notes. Loss on repurchase of convertible senior notes relates to the fair value in excess of the carrying value of the portion of the 2018 Notes repurchased. Foreign exchange gains and losses relate to the revaluation of foreign currency denominated trade receivables.

Income Tax Expense

Income tax expense consists of U.S. federal, state and foreign income taxes. We are required to pay income taxes in certain states and foreign jurisdictions. Historically, we have not been required to pay significant U.S. federal income taxes due to our accumulated net operating losses.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers: Topic 606 ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard allows entities to apply either of two methods: (a) retrospective application to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (b) retrospective application with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Topic 606 ("ASU 2015-14"), which defers the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are evaluating the impact of adopting this new standard on our financial statements and our method of adoption.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases: Topic 842 ("ASU 2016-02"), which provides updated guidance on lease accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted. We are evaluating the impact of adopting this new standard on our financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation-Stock Compensation: Topic 718 ("ASU 2016-09"), which provides updated guidance on several aspects of the accounting for share-based payment transactions. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. We expect to adopt this guidance on January 1, 2017 and we are evaluating the impact of this guidance on our financial statements.

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Results of Operations

Comparison of the Three Months Ended September 30, 2016 and 2015

Revenue

	Three Months Ended September 30,								Period-to-Period Change
	2016				2015
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percentage
	(dollars in thousands)
Revenue by Type:
License software	$	31,486	38	%	$	31,343	45	%	$	143	—	%
Subscription and maintenance support	36,509		43	%	29,828		43	%	6,681		22	%
Professional services and other	16,127		19	%	7,926		12	%	8,201		103	%
Total revenue	$	84,122	100	%	$	69,097	100	%	$	15,025	22	%
Revenue by Geography:
North America	$	46,696	56	%	$	40,028	58	%	$	6,668	17	%
EMEA	23,531		28	%	16,625		24	%	6,906		42	%
Emerging Markets	13,895		16	%	12,444		18	%	1,451		12	%
Total revenue	$	84,122	100	%	$	69,097	100	%	$	15,025	22	%

Total revenue for the three months ended September 30, 2016increased by 22%, or $15.0 million, to $84.1 million as compared to the same period in 2015. This growth was primarily driven by a 22% increase in subscription and maintenance support revenue and a 103%increase in professional services and other revenue. Deferred revenue decreased by $5.3 million for the three months ended September 30, 2016, compared to an increase of $2.0 million for the same period in 2015.

North America revenue for the three months ended September 30, 2016increased by 17%, or $6.7 million, to $46.7 million as compared to the same period in 2015. The increase in North America revenue for the three months ended September 30, 2016 was due to an increase in subscription and maintenance support revenue and professional services and other revenue, partially offset by a decrease in license software revenue.

Europe, Middle East and Africa, or EMEA, revenue for the three months ended September 30, 2016increased42%, or $6.9 million, to $23.5 million as compared to the same period in 2015. The increase in EMEA revenue for the three months ended September 30, 2016 was due to an increase in license software revenue, subscription and maintenance support revenue and professional services and other revenue.

Asia Pacific, the Caribbean and Latin America, or Emerging Markets, revenue for the three months ended September 30, 2016increased by 12%, or $1.5 million, to $13.9 million compared to the same period in 2015. The increase in Emerging Markets revenue for the three months ended September 30, 2016 was due to an increase in license software revenue and subscription and maintenance support revenue, partially offset by a decrease in professional services and other revenue.

License Software

License software revenue for the three months ended September 30, 2016increased by $0.1 million, to $31.5 million, compared to the same period in 2015. The increase in license software revenue for the three months ended September 30, 2016 reflects an increase in EMEA and Emerging Markets, partially offset by a decrease in license software revenue in North America. Deferred license software revenue decreased by $7.3 million for the three months ended September 30, 2016, compared to a decrease of $0.3 million for the same period in 2015.

Subscription and Maintenance Support

Subscription and maintenance support revenue for the three months ended September 30, 2016increased by 22%, or $6.7 million, to $36.5 million, compared to the same period in 2015. The increase in subscription and maintenance support revenue for the three months ended September 30, 2016 was the result of growth in our subscription revenue associated with our SaaS

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platforms, which included contributions from recent acquisitions, and growth in our installed base of customers who purchased maintenance support. Our SaaS subscription revenue for the three months ended September 30, 2016 increased by $3.5 million to $12.7 million, compared to the same period in 2015. Deferred subscription and maintenance support revenue decreased by $2.2 million for the three months ended September 30, 2016, compared to a decrease of $4.4 million for the same period in 2015.

Professional Services and Other

Professional services and other revenue for the three months ended September 30, 2016increased by 103%, or $8.2 million, to $16.1 million, compared to the same period in 2015. The increase in professional services and other revenue for the three months ended September 30, 2016 was primarily due to revenue recognized from several large projects as we've reached milestones for those projects, and also due to increased professional services activity. Deferred professional services and other revenue increased by $4.3 million for the three months ended September 30, 2016, compared to an increase of $6.6 million for the same period in 2015.

Cost of Revenue and Gross Profit

	Three Months Ended September 30,									Period-to-Period Change
	2016				2015
	Amount		Percent of Related Revenue		Amount			Percent of Related Revenue		Amount			Percentage
	(dollars in thousands)
Cost of Revenue:
License software	$	1,799	6	%	$	2,444		8	%	$	(645	)	(26	)%
Subscription and maintenance support	11,894		33	%	9,787			33	%	2,107			22	%
Professional services and other	10,060		62	%	9,429			119	%	631			7	%
Total cost of revenue	$	23,753	28	%	$	21,660		31	%	$	2,093		10	%
Gross Profit:
License software	$	29,687	94	%	$	28,899		92	%	$	788		3	%
Subscription and maintenance support	24,615		67	%	20,041			67	%	4,574			23	%
Professional services and other	6,067		38	%	(1,503		)	(19	)%	7,570			504	%
Total gross profit	$	60,369	72	%	$	47,437		69	%	$	12,932		27	%

For the three months ended September 30, 2016, our gross margin increased to 72% of revenue as compared to 69% for the same period in 2015, and our gross profit increased by 27%, or $12.9 million, to $60.4 million. The total gross profit increase was primarily due to higher growth in revenue relative to cost of revenue.

For the three months ended September 30, 2016, license software gross margin increased to 94% as compared to 92% for the same period in 2015 and license software gross profit increased by 3% to $29.7 million. License software cost of revenue decreased by 26%, or $0.6 million, to $1.8 million for the three months ended September 30, 2016, compared to the same period in 2015. The decrease in license software cost of revenue was primarily due to a decrease of $0.2 million in personnel-related costs and $0.2 million in equipment and software expenses. The increase in license software gross profit was driven by the decrease in license software cost of revenue.

For the three months ended September 30, 2016, subscription and maintenance support gross margin remained approximately unchanged at 67% as compared to the same period in 2015 and subscription and maintenance support gross profit increased by 23% to $24.6 million. Subscription and maintenance support cost of revenue increased by 22%, or $2.1 million, to $11.9 million for the three months ended September 30, 2016, compared to the same period in 2015. The increase in subscription and maintenance support cost of revenue was related to our continued investment in our product offerings, primarily our BroadCloud offering, along with the impact of recent acquisitions. The increase was primarily due to a $1.0 million increase in operational costs associated with hosting our SaaS offerings, a $0.7 million increase in personnel-related costs and a $0.3 million increase in third party software maintenance costs. The increase in subscription and maintenance support gross profit was driven by higher revenue growth relative to growth in subscription and maintenance services cost of revenue.

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For the three months ended September 30, 2016, professional services and other gross margin increased to 38% as compared to (19)% for the same period in 2015 and professional services and other gross profit increased by 504% to $6.1 million. Professional services and other cost of revenue increased by 7%, or $0.6 million, to $10.1 million for the three months ended September 30, 2016, compared to the same period in 2015. The increase in professional services and other cost of revenue was primarily due to a $0.9 million increase in personnel-related costs, along with an increase of $0.3 million in consulting expenses. The increase was partially offset by a $0.5 million decrease in hardware expenses. The increase in professional services and other gross profit was driven by higher revenue growth relative to growth in professional services and other cost of revenue.

Operating Expenses

	Three Months Ended September 30,								Period-to-Period Change
	2016				2015
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percentage
	(dollars in thousands)
Sales and marketing	$	26,112	31	%	$	20,738	30	%	$	5,374	26	%
Research and development	19,931		24	%	14,974		22	%	4,957		33	%
General and administrative	12,759		15	%	10,955		16	%	1,804		16	%
Total operating expenses	$	58,802	70	%	$	46,667	68	%	$	12,135	26	%

Sales and Marketing. Sales and marketing expense increased by 26%, or $5.4 million, to $26.1 million for the three months ended September 30, 2016, compared to the same period in 2015. This increase was primarily due to a $5.3 million increase in personnel-related costs and a $0.3 million increase in travel costs, partially offset by a $0.7 million decrease in consulting expenses.

Research and Development. Research and development expense increased by 33%, or $5.0 million, to $19.9 million for the three months ended September 30, 2016, compared to the same period in 2015. This increase was primarily due to a $4.1 million increase in personnel-related costs and a $0.5 million increase in consulting expenses.

General and Administrative. General and administrative expense increased by 16%, or $1.8 million, to $12.8 million for the three months ended September 30, 2016, compared to the same period in 2015. This increase was primarily due to a $2.0 million increase in personnel-related costs, partially offset by a $0.3 million decrease in third party legal, accounting and consulting expenses.

Income from Operations

We had income from operations of $1.6 million for the three months ended September 30, 2016, as compared to $0.8 million for the same period in 2015.

Other Expense

	Three Months Ended September 30,										Period-to-Period Change
	2016					2015
	Amount			Percent of Total Revenue		Amount			Percent of Total Revenue		Amount			Percentage
	(dollars in thousands)
Interest expense	$	3,959		5	%	$	2,848		4	%	$	1,111		39	%
Interest income	(683		)	(1	)%	(323		)	*		(360		)	111	%
Other, net	(207		)	*		4,089			6	%	(4,296		)	(105	)%
Total other expense, net	$	3,069		4	%	$	6,614		10	%	$	(3,545	)	(54	)%

* Less than 1%

Total other expense, net for the three months ended September 30, 2016decreased by $3.5 million compared to the same period in 2015. The decrease in total other expense was due to the $4.2 million loss in prior year related to the repurchase of a portion

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of the 2018 Notes and the interest income of $0.4 related to our investments, partially offset by an increase in interest expense related to our 2022 Notes.

Benefit from Income Taxes

Benefit from income taxes was $0.9 million for the three months ended September 30, 2016, compared to $2.6 million for the same period in 2015. The decrease in our benefit from income taxes is due primarily to changes in the projected mix of earnings among jurisdictions as well as an increase in our valuation allowance for certain foreign jurisdictions, partially offset by an increase in research and development credits.

Comparison of the Nine Months Ended September 30, 2016 and 2015

Revenue

	Nine Months Ended September 30,								Period-to-Period Change
	2016				2015
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percentage
	(dollars in thousands)
Revenue by Type:
License software	$	95,992	40	%	$	84,370	45	%	$	11,622	14	%
Subscription and maintenance support	106,348		45	%	82,263		43	%	24,085		29	%
Professional services and other	36,639		15	%	22,619		12	%	14,020		62	%
Total revenue	$	238,979	100	%	$	189,252	100	%	$	49,727	26	%
Revenue by Geography:
North America	$	132,545	56	%	$	121,897	64	%	$	10,648	9	%
EMEA	68,000		28	%	48,188		26	%	19,812		41	%
Emerging Markets	38,434		16	%	19,167		10	%	19,267		101	%
Total revenue	$	238,979	100	%	$	189,252	100	%	$	49,727	26	%

Total revenue for the nine months ended September 30, 2016increased by 26%, or $49.7 million, to $239.0 million as compared to the same period in 2015. This growth was driven by a 14%increase in license software revenue, a 29% increase in subscription and maintenance support revenue and a 62%increase in professional services and other revenue. Deferred revenue decreased by $9.0 million for the nine months ended September 30, 2016, compared to an increase of $8.2 million for the same period in 2015.

North America revenue for the nine months ended September 30, 2016increased by 9%, or $10.6 million, to $132.5 million as compared to the same period in 2015. The increase in North America revenue for the nine months ended September 30, 2016 was due to an increase in subscription and maintenance support revenue and professional services and other revenue, partially offset by a decrease in license software revenue.

EMEA revenue for the nine months ended September 30, 2016increased41%, or $19.8 million, to $68.0 million as compared to the same period in 2015. The increase in EMEA revenue for the nine months ended September 30, 2016 was due to an increase in license software revenue, subscription and maintenance support revenue and professional services and other revenue.

Emerging Markets revenue for the nine months ended September 30, 2016increased by 101%, or $19.3 million, to $38.4 million compared to the same period in 2015. The increase in Emerging Markets revenue for the nine months ended September 30, 2016 was primarily due to an increase in license software revenue and subscription and maintenance support revenue, partially offset by a decrease in professional services and other revenue.

License Software

License software revenue for the nine months ended September 30, 2016increased by 14%, or $11.6 million, to $96.0 million, compared to the same period in 2015. The increase in license software revenue for the nine months ended September 30, 2016

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reflects an increase in license software revenue in EMEA and Emerging Markets, partially offset by a decrease in North America. Deferred license software revenue decreased by $13.7 million for the nine months ended September 30, 2016, compared to an increase of $5.8 million for the same period in 2015.

Subscription and Maintenance Support

Subscription and maintenance support revenue for the nine months ended September 30, 2016increased by 29%, or $24.1 million, to $106.3 million, compared to the same period in 2015. The increase in subscription and maintenance support revenue for the nine months ended September 30, 2016 was the result of growth in our subscription revenue associated with our SaaS platforms, which included contributions from recent acquisitions, and growth in our installed base of customers who purchased maintenance support. Our SaaS subscription revenue for the nine months ended September 30, 2016 increased by $11.6 million to $37.5 million, compared to the same period in 2015. Deferred subscription and maintenance support revenue decreased by $3.2 million for the nine months ended September 30, 2016, compared to a decrease of $3.2 million for the same period in 2015.

Professional Services and Other

Professional services and other revenue for the nine months ended September 30, 2016increased by 62%, or $14.0 million, to $36.6 million, compared to the same period in 2015. The increase in professional services and other revenue for the nine months ended September 30, 2016 was primarily due to revenue recognized from several large projects as we've reached milestones for those projects, and also due to increased professional services activity, including contributions from recent acquisitions. Deferred professional services and other revenue increased by $8.0 million for the nine months ended September 30, 2016, compared to an increase of $5.6 million for the same period in 2015.

Cost of Revenue and Gross Profit

	Nine Months Ended September 30,								Period-to-Period Change
	2016				2015
	Amount		Percent of Related Revenue		Amount		Percent of Related Revenue		Amount			Percentage
	(dollars in thousands)
Cost of Revenue:
License software	$	5,697	6	%	$	7,984	9	%	$	(2,287	)	(29	)%
Subscription and maintenance support	34,060		32	%	28,958		35	%	5,102			18	%
Professional services and other	27,340		75	%	20,949		93	%	6,391			31	%
Total cost of revenue	$	67,097	28	%	$	57,891	31	%	$	9,206		16	%
Gross Profit:
License software	$	90,295	94	%	$	76,386	91	%	$	13,909		18	%
Subscription and maintenance support	72,288		68	%	53,305		65	%	18,983			36	%
Professional services and other	9,299		25	%	1,670		7	%	7,629			457	%
Total gross profit	$	171,882	72	%	$	131,361	69	%	$	40,521		31	%

For the nine months ended September 30, 2016, our gross margin increased to 72% of revenue as compared to 69% for the same period in 2015, and our gross profit increased by 31%, or $40.5 million, to $171.9 million. The total gross profit increase was primarily due to higher revenue growth relative to cost of revenue.

For the nine months ended September 30, 2016, license software gross margin increased to 94% as compared to 91% for the same period in 2015 and license software gross profit increased by 18% to $90.3 million. License software cost of revenue decreased by 29%, or $2.3 million, to $5.7 million for the nine months ended September 30, 2016, compared to the same period in 2015. The decrease in license software cost of revenue was primarily due to a $1.1 million decrease in personnel-related costs, a $0.6 million decrease in equipment and software expenses and a $0.3 million decrease in amortization of acquired intangible assets. The increase in license software gross profit was driven by revenue growth and a decrease in license software cost of revenue.

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For the nine months ended September 30, 2016, subscription and maintenance support gross margin increased to 68% as compared to 65% the same period in 2015 and subscription and maintenance support gross profit increased by 36% to $72.3 million. Subscription and maintenance support cost of revenue increased by 18%, or $5.1 million, to $34.1 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increase in subscription and maintenance support cost of revenue was primarily related to our continued investment in our product offerings, primarily our BroadCloud offering, along with the impact of recent acquisitions. The increase was primarily due to a $1.4 million increase in personnel-related costs, a $3.3 million increase in operational costs associated with hosting our SaaS offerings and a $0.4 million increase in third party software maintenance costs. The increase in subscription and maintenance support gross profit was driven by higher revenue growth relative to growth in subscription and maintenance services cost of revenue.

For the nine months ended September 30, 2016, professional services and other gross margin increased to 25% as compared to 7% for the same period in 2015 and professional services and other gross profit increased by 457% to $9.3 million. Professional services and other cost of revenue increased by 31%, or $6.4 million, to $27.3 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increase in professional services and other cost of revenue was primarily due to a $6.6 million increase in personnel-related costs, which includes the impact of recent acquisitions, and a $0.3 million increase in amortization of acquired intangible assets, partially offset by a $0.5 million decrease in consulting expenses and a $0.5 million decrease in equipment and software expenses. The increase in professional services and other gross profit was driven by higher revenue growth relative to growth in professional services and other cost of revenue.

Operating Expenses

	Nine Months Ended September 30,								Period-to-Period Change
	2016				2015
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percentage
	(dollars in thousands)
Sales and marketing	$	75,386	32	%	$	59,852	32	%	$	15,534	26	%
Research and development	58,120		24	%	45,524		24	%	12,596		28	%
General and administrative	36,675		15	%	31,366		17	%	5,309		17	%
Total operating expenses	$	170,181	71	%	$	136,742	72	%	$	33,439	24	%

Sales and Marketing. Sales and marketing expense increased by 26%, or $15.5 million to $75.4 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increase was primarily due to a $13.2 million increase in personnel-related costs, a $1.3 million increase in travel costs, a $0.5 million increase in equipment and software expenses and a $0.6 million increase in recruiting and training expenses, partially offset by a decrease of $0.7 million in consulting expenses.

Research and Development. Research and development expense increased by 28%, or $12.6 million to $58.1 million for the nine months ended September 30, 2016, compared to the same period in 2015. This increase was primarily due to a $10.5 million increase in personnel-related costs, a $0.9 million increase in consulting expenses and a $0.4 million increase in travel costs.

General and Administrative. General and administrative expense increased by 17%, or $5.3 million, to $36.7 million for the nine months ended September 30, 2016, compared to the same period in 2015. This increase was primarily due to a $4.5 million increase in personnel-related costs and a $0.3 million increase in travel expenses.

Income (loss) from Operations

We had income from operations of $1.7 million for the nine months ended September 30, 2016, as compared to loss from operations of $5.4 million for the same period in 2015.

Other Expense

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	Nine Months Ended September 30,										Period-to-Period Change
	2016					2015
	Amount			Percent of Total Revenue		Amount			Percent of Total Revenue		Amount			Percentage
	(dollars in thousands)
Interest expense	$	11,738		5	%	$	6,864		4	%	$	4,874		71	%
Interest income	(1,950		)	(1	)%	(819		)	*		(1,131		)	138	%
Other, net	(533		)	*		5,312			3	%	(5,845		)	(110	)%
Total other expense, net	$	9,255		4	%	$	11,357		6	%	$	(2,102	)	(19	)%

* Less than 1%

Total other expense, net for the nine months ended September 30, 2016 decreased by $2.1 million compared to the same period in 2015. The decrease in total other expense was due to the $4.2 million loss in prior year related to the repurchase of a portion of the 2018 Notes, an increase in interest income of $1.1 million related to our investments and an increase in the foreign currency translation gains related to the revaluation of foreign denominated trade receivables, partially offset by an increase in interest expense related to our 2022 Notes.

Benefit from Income Taxes

Benefit from income taxes was $2.5 million for the nine months ended September 30, 2016, compared to $5.3 million for the same period in 2015. The decrease in our benefit from income taxes is due primarily to changes in the projected mix of earnings among jurisdictions as well as an increase in our valuation allowance for certain foreign jurisdictions, partially offset by an increase in research and development credits.

Liquidity and Capital Resources

Resources

We fund our operations principally with cash provided by operating activities.

Cash and Cash Equivalents, Accounts Receivable and Working Capital

The following tables present a summary of our cash and cash equivalents, accounts receivable, working capital and cash flows for the periods indicated (in thousands):

	September 30, 2016		December 31, 2015
Cash and cash equivalents	$	100,047	$	175,857
Accounts receivable, net	104,521		108,113
Working capital	241,436		234,506

	Nine Months Ended   September 30,
	2016			2015
Net cash provided by (used in):
Operating activities	$	47,740		$	18,246
Investing activities	(124,049		)	(24,695		)
Financing activities	1,025			117,927

Our cash and cash equivalents at September 30, 2016 were held for working capital and other general corporate purposes and were invested primarily in demand deposit accounts or money market funds. We do not enter into investments for trading or speculative purposes.

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Operating Activities

For the nine months ended September 30, 2016, net cash provided by operating activities was $47.7 million, compared to $18.2 million for the same period in 2015. The increase in net cash provided by operating activities was primarily related to a $15.2 million increase due to the aggregate change in non-cash items, a $7.9 million increase from the net change in other current and long-term assets and liabilities and a decrease in net loss of $6.4 million. Non-cash items primarily consist of stock-based compensation expense, depreciation and amortization, provision for deferred income taxes, tax windfall benefits from stock option exercises, non-cash interest on convertible debt and amortization of software licenses.

Investing Activities

Our investing activities have consisted primarily of net investment in marketable securities, business acquisitions and capital expenditures for property and equipment. For the nine months ended September 30, 2016, net cash used in investing activities was $124.0 million, compared to $24.7 million for the same period in 2015. This increase in net cash used in investing activities was attributable to a $96.1 million increase in net purchases of marketable securities and a $3.7 million increase in payments for acquisitions, partially offset by a $0.4 million decrease in capital expenditures for property and equipment, compared to the same period in 2015.

Financing Activities

For the nine months ended September 30, 2016, net cash provided by financing activities was $1.0 million, compared to $117.9 million for the same period in 2015. Net cash provided by financing activities primarily consisted of proceeds from the exercise of stock options of $13.9 million and tax windfall benefits from stock options exercised of $0.2 million, partially offset by taxes paid on the vesting of restricted stock units of $13.0 million.

Borrowings and Credit Facilities

2022 Convertible Senior Notes

In September 2015, we issued $201.3 million aggregate principal amount of the 2022 Notes, with net proceeds of $195.2 million. The 2022 Notes are general unsecured obligations, with interest payable semi-annually in cash at a rate of 1.0% per annum, and will mature on September 1, 2022, unless earlier repurchased, redeemed or converted.

The initial conversion price for the 2022 Notes is approximately $38.72 per share. The conversion price is subject to adjustment in some events, but will not be adjusted for accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if we issue a notice of redemption on or after September 1, 2019 as described below, we will increase the conversion rate for a holder who elects to convert its 2022 Notes in connection with such a corporate event or during the related redemption period in certain circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our current intent to settle conversions through combination settlement with a specified dollar amount per $1,000 principal amount of 2022 Notes of $1,000. See Note 8, Borrowings, contained elsewhere in this Quarterly Report on Form 10-Q for additional details about the 2022 Notes.

2018 Convertible Senior Notes

In June 2011, we issued $120.0 million aggregate principal amount of the 2018 Notes, with net proceeds of $116 million. The 2018 Notes are our senior unsecured obligations, with interest payable semi-annually in cash at a rate of 1.50% per annum, and will mature on July 1, 2018, unless earlier repurchased, redeemed or converted. Concurrently with the issuance of the 2022 Notes, we repurchased an aggregate of $50.9 million principal amount in outstanding 2018 Notes. We have not repurchased any additional outstanding 2018 Notes.

The initial conversion price for the 2018 Notes is approximately $41.99 per share. The conversion price is subject to adjustment in some events, but will not be adjusted for accrued interest. Upon conversion, we will pay cash up to the aggregate principal amount of the 2018 Notes to be converted and deliver shares of our common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the 2018 Notes being converted. See Note 8, Borrowings, contained elsewhere in this Quarterly Report on Form 10-Q for additional details about the 2018 Notes.

Operating and Capital Expenditure Requirements

We believe that the cash generated from operations, our current cash, cash equivalents and short-term and long-term investment balances and interest income we earn on these balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months. In the future, we expect our operating and capital expenditures to grow, through organic growth and

36

acquisitions, as we increase headcount, expand our business activities, grow our customer base and implement and enhance our information technology and enterprise resource planning systems. As sales grow, we expect our accounts receivable balance to increase. Any such increase in accounts receivable may not be completely offset by increases in accounts payable and accrued expenses, which would likely result in greater working capital requirements.

If our available cash resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or convertible debt securities or enter into a credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.

Contractual Obligations

We have contractual obligations for non-cancelable office space, notes payable and other short-term and long-term liabilities. The following table discloses aggregate information about our contractual obligations as of September 30, 2016 and periods in which payments are due (in thousands):

	Payments Due by Year
	Total		Remainder of 2016		2017 - 2018		2019 - 2020		After 2020
Convertible senior notes, including interest *	$	284,503	$	518	$	74,685	$	4,025	$	205,275
Operating lease obligations	24,265		1,584		11,416		5,704		5,561
Total	$	308,768	$	2,102	$	86,101	$	9,729	$	210,836

* Contractual interest obligations related to the convertible senior notes totaled $14.1 million at September 30, 2016, including $0.5 million, $5.6 million, $4.0 million and $4.0 million due in the years 2016, 2017-2018, 2019-2020 and after 2020, respectively. There was no contractual interest obligation for the remainder of 2016.

As of September 30, 2016, we had gross unrecognized tax benefits of $7.0 million, including interest and penalties of $0.4 million. We do not expect to recognize any of these benefits in 2016. Furthermore, we are not able to provide a reliable estimate of the timing of future payments relating to these unrecognized benefits.

Non-GAAP Financial Measures

In addition to our GAAP operating results, we use certain non-GAAP financial measures when planning, monitoring, and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of certain non-cash expenses, such as stock-based compensation expense, amortization of acquired intangibles expense, non-cash interest expense on our convertible senior notes and non-cash tax benefit or expense included in our tax provision, so management and investors can compare our core business operating results over multiple periods. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for results reported in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. We believe that these non-GAAP measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business, as they exclude certain expenses.

The presentation of non-GAAP net income, non-GAAP net income per share, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating expenses and other non-GAAP financial measures in this Quarterly Report on Form 10-Q is not meant to be a substitute for “net income,” “net income per share,” “cost of revenue,” “gross profit,” “income from operations,” "operating expenses" or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. Our definition of “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross profit,” “non-GAAP income from operations," "non-GAAP operating expenses" and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period and may modify “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross profit,” “non-GAAP income from operations” and such other non-GAAP measures by excluding these expenses and gains.

Non-GAAP cost of revenue, license software cost of revenue, subscription and maintenance cost of revenue and professional services and other cost of revenue. We define non-GAAP cost of revenue as a cost of revenue less stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP cost of revenue to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and investors can compare our cost of revenue over multiple periods.

Non-GAAP gross profit, license software gross profit, subscription and maintenance support gross profit and professional services and other gross profit. We define non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and investors can compare our sales margins over multiple periods.

Non-GAAP income from operations. We define non-GAAP income from operations as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP income from operations to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compare our core business operating results over multiple periods.

37

Non-GAAP operating expenses, sales and marketing expense, research and development expense and general and administrative expense. We define non-GAAP operating expenses as operating expense less stock-based compensation expense allocated to sales and marketing, research and development and general and administrative expenses. Similarly, we define non-GAAP sales and marketing, research and development and general and administrative expenses as the relevant GAAP measure less stock-based compensation expense allocated to the particular expense item.

Non-GAAP net income and net income per share. We define non-GAAP net income as net income plus stock-based compensation expense, amortization expense for acquired intangible assets, non-cash interest expense on our convertible senior notes, foreign currency transaction gains and losses, loss on repurchase of our convertible senior notes and non-cash tax expense included in the GAAP tax provision. We define non-GAAP income per share as non-GAAP net income divided by the weighted average shares outstanding.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(in thousands)
Non-GAAP cost of revenue:
GAAP license cost of revenue	$	1,799		$	2,444		$	5,697		$	7,984
(percent of related revenue)	6		%	8		%	6		%	9		%
Less:
Stock-based compensation expense	146			234			472			771
Amortization of acquired intangible assets	334			430			1,003			1,297
Non-GAAP license cost of revenue	$	1,319		$	1,780		$	4,222		$	5,916
(percent of related revenue)	4		%	6		%	4		%	7		%
GAAP subscription and maintenance support cost of revenue	$	11,894		$	9,787		$	34,060		$	28,958
(percent of related revenue)	33		%	33		%	32		%	35		%
Less:
Stock-based compensation expense	952			607			2,438			2,329
Amortization of acquired intangible assets	1,197			1,010			3,431			3,122
Non-GAAP subscription and maintenance support cost of revenue	$	9,745		$	8,170		$	28,191		$	23,507
(percent of related revenue)	27		%	27		%	27		%	29		%
GAAP professional services and other cost of revenue	$	10,060		$	9,429		$	27,340		$	20,949
(percent of related revenue)	62		%	119		%	75		%	93		%
Less:
Stock-based compensation expense	1,127			1,060			3,208			2,187
Amortization of acquired intangible assets	175			175			525			233
Non-GAAP professional services and other cost of revenue	$	8,758		$	8,194		$	23,607		$	18,529
(percent of related revenue)	54		%	103		%	64		%	82		%

38

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(in thousands)
Non-GAAP gross profit:
GAAP gross profit	$	60,369		$	47,437		$	171,882		$	131,361
(percent of total revenue)	72		%	69		%	72		%	69		%
Plus:
Stock-based compensation expense	2,225			1,901			6,118			5,287
Amortization of acquired intangible assets	1,706			1,615			4,959			4,652
Non-GAAP gross profit	$	64,300		$	50,953		$	182,959		$	141,300
(percent of total revenue)	76		%	74		%	77		%	75		%
GAAP license gross profit	$	29,687		$	28,899		$	90,295		$	76,386
(percent of related revenue)	94		%	92		%	94		%	91		%
Plus:
Stock-based compensation expense	146			234			472			771
Amortization of acquired intangible assets	334			430			1,003			1,297
Non-GAAP license gross profit	$	30,167		$	29,563		$	91,770		$	78,454
(percent of related revenue)	96		%	94		%	96		%	93		%
GAAP subscription and maintenance support gross profit	$	24,615		$	20,041		$	72,288		$	53,305
(percent of related revenue)	67		%	67		%	68		%	65		%
Plus:
Stock-based compensation expense	952			607			2,438			2,329
Amortization of acquired intangible assets	1,197			1,010			3,431			3,122
Non-GAAP subscription and maintenance support gross profit	$	26,764		$	21,658		$	78,157		$	58,756
(percent of related revenue)	73		%	73		%	73		%	71		%
GAAP professional services and other gross profit (loss)	$	6,067		$	(1,503	)	$	9,299		$	1,670
(percent of related revenue)	38		%	(19		)%	25		%	7		%
Plus:
Stock-based compensation expense	1,127			1,060			3,208			2,187
Amortization of acquired intangible assets	175			175			525			233
Non-GAAP professional services and other gross profit	$	7,369		$	(268	)	$	13,032		$	4,090
(percent of related revenue)	46		%	(3		)%	36		%	18		%

39

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(in thousands)
Non-GAAP income from operations:
GAAP income (loss) from operations	$	1,567		$	770		$	1,701		$	(5,381	)
(percent of total revenue)	2		%	1		%	1		%	(3		)%
Plus:
Stock-based compensation expense	14,021			9,157			38,307			30,387
Amortization of acquired intangible assets	1,706			1,615			4,959			4,652
Non-GAAP income from operations	$	17,294		$	11,542		$	44,967		$	29,658
(percent of total revenue)	21		%	17		%	19		%	16		%
GAAP operating expense	$	58,802		$	46,667		$	170,181		$	136,742
(percent of total revenue)	70		%	68		%	71		%	72		%
Less:
Stock-based compensation expense	11,796			7,256			32,189			25,100
Non-GAAP operating expense	$	47,006		$	39,411		$	137,992		$	111,642
(percent of total revenue)	56		%	57		%	58		%	59		%
GAAP sales and marketing expense	$	26,112		$	20,738		$	75,386		$	59,852
(percent of total revenue)	31		%	30		%	32		%	32		%
Less:
Stock-based compensation expense	4,973			2,812			13,321			10,048
Non-GAAP sales and marketing expense	$	21,139		$	17,926		$	62,065		$	49,804
(percent of total revenue)	25		%	26		%	26		%	26		%
GAAP research and development expense	$	19,931		$	14,974		$	58,120		$	45,524
(percent of total revenue)	24		%	22		%	24		%	24		%
Less:
Stock-based compensation expense	4,249			2,428			11,414			8,933
Non-GAAP research and development expense	$	15,682		$	12,546		$	46,706		$	36,591
(percent of total revenue)	19		%	18		%	20		%	19		%
GAAP general and administrative expense	$	12,759		$	10,955		$	36,675		$	31,366
(percent of total revenue)	15		%	16		%	15		%	17		%
Less:
Stock-based compensation expense	2,574			2,016			7,454			6,119
Non-GAAP general and administrative expense	$	10,185		$	8,939		$	29,221		$	25,247
(percent of total revenue)	12		%	13		%	12		%	13		%

40

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(in thousands, except per share data)
Non-GAAP net income and income per share:
GAAP net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
(percent of total revenue)	(1		)%	(5		)%	(2		)%	(6		)%
Adjusted for:
Stock-based compensation expense	14,021			9,157			38,307			30,387
Amortization of acquired intangible assets	1,706			1,615			4,959			4,652
Non-cash interest expense on our convertible senior notes	3,197			2,325			9,428			5,441
Foreign currency transaction losses (gains)	(207		)	336			(533		)	1,559
Loss on repurchase of convertible senior notes	—			3,752			—			3,752
Non-cash tax benefit	(1,758		)	(2,994		)	(4,775		)	(6,402		)
Non-GAAP net income	$	16,354		$	10,940		$	42,377		$	27,945
(percent of total revenue)	19		%	16		%	18		%	15		%
GAAP net loss per basic common share	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)
Adjusted for:
Stock-based compensation expense	0.47			0.31			1.30			1.04
Amortization of acquired intangible assets	0.06			0.06			0.17			0.16
Non-cash interest expense on our convertible senior notes	0.11			0.08			0.32			0.19
Foreign currency transaction losses (gains)	(0.01		)	0.01			(0.02		)	0.05
Loss on repurchase of convertible senior notes	—			0.13			—			0.13
Non-cash tax benefit	(0.06		)	(0.10		)	(0.16		)	(0.22		)
Non-GAAP net income per basic common share	$	0.55		$	0.37		$	1.44		$	0.96
GAAP net loss per diluted common share	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)
Adjusted for:
Stock-based compensation expense	0.44			0.31			1.25			1.02
Amortization of acquired intangible assets	0.05			0.05			0.16			0.16
Non-cash interest expense on our convertible senior notes	0.10			0.08			0.31			0.18
Foreign currency transaction losses (gains)	(0.01		)	0.01			(0.02		)	0.05
Loss on repurchase of convertible senior notes	—			0.13			—			0.13
Non-cash tax benefit	(0.06		)	(0.10		)	(0.16		)	(0.21		)
Non-GAAP net income per diluted common share	$	0.52		$	0.37		$	1.39		$	0.94

Off-Balance Sheet Arrangements

As of September 30, 2016, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into interest rate or exchange rate hedging arrangements to manage the risks described below.

Interest Rate Risk

The interest rate is fixed on all our outstanding loan balances; consequently, we do not have exposure to risks due to increases in the variable rates tied to indexes. We maintain a short-term investment portfolio consisting mainly of highly liquid short-term money market funds, which we consider to be cash equivalents. These securities and investments earn interest at variable rates and, as a result, decreases in market interest rates would generally result in decreased interest income. At September 30, 2016, we had long-term debt of $270.4 million associated with our convertible senior notes, which are fixed rate instruments. We would not expect a 10% change in interest rates to have a material impact on our results of operations.

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations because of changes in foreign currency exchange rates, particularly changes in exchange rates between the U.S. dollar and the Euro and British Pound, the currencies of countries where we currently have our most significant international operations. On a historical basis, invoicing has largely been denominated in U.S. dollars; however, we expect an increasing proportion of our future business to be conducted in currencies other than U.S. dollars. In particular, invoices for our SaaS offerings are denominated in local currencies, which exposes us to foreign currency exchange risk, and we expect this risk to increase as SaaS revenue grows as a proportion of our total revenue. Our expenses are generally denominated in the currencies of the countries in which our operations are located, with our most significant operations at present located in the United States, the United Kingdom, Germany, Canada and India. As a result, our results of operations would generally be adversely affected by a decline in the value of the U.S. dollar relative to these foreign currencies. However, we believe this net exposure is not material at this time. As we continue to grow our international operations, our exposure to foreign currency risk will likely become more significant. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations.

Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars. In particular, the amount of cash and cash equivalents that we report in U.S. Dollars would be impacted by a significant fluctuation in foreign currency exchange rates. Based on our cash and cash equivalent balances held in foreign currencies at September 30, 2016, if overall foreign currency exchange rates in comparison to the U.S. Dollar uniformly weakened by 10%, the amount of cash and cash equivalents we would report in U.S. Dollars would decrease by approximately $2.6 million, assuming constant foreign currency cash and cash equivalents balances, although the actual effects may differ materially from this hypothetical analysis.

42

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2016, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

43

PART II: OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we are a defendant in litigation arising out of the ordinary course of business. Although it is difficult to predict the ultimate outcomes of these cases, we are not a party to any material, pending legal proceeding, nor are we aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our common stock are adverse to us or have a material interest adverse to us.

ITEM 1A. Risk Factors

Except as set forth below, there have been no material changes in risk factors from those disclosed in Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the Securities and Exchange Commission, or SEC, on February 25, 2015.

Any significant disruption in our SaaS hosting network infrastructure, interruptions or delays in services, whether caused by us or third parties on whom we rely, could impair the delivery of our products and harm our business. 

We currently host our BroadCloud service and provide such services on a SaaS basis to our service provider customers. This hosting network infrastructure is a critical part of our business operations and we rely on third parties to provide certain portions of this infrastructure. We do not control the operations of the third-party infrastructure providers on which some of our cloud services are deployed and BroadCloud, and these facilities, are vulnerable to any information security breaches, power outages, telecommunications failures or other issues that the data center may experience. Our third party data center providers are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. The occurrence of any of these disasters or other unanticipated problems could result in lengthy interruptions in our service. Furthermore, the availability of our platform could be interrupted by a number of additional factors, including our customers’ inability to access the Internet, the failure of our network or software systems due to human or other error, security breaches or ability of the infrastructure to handle spikes in customer usage. We have in the past experienced, and may in the future experience, interruptions, delays and outages in service and availability from time to time due to such factors. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties under our agreements with certain customers, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our service is unreliable. 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

None.

44

ITEM 6. Exhibits

Exhibit Number	Description of Document
3.1	Amended and Restated Certificate of Incorporation. (1)
3.2	Second Amended and Restated Bylaws. (2)
4.1	Indenture, dated as of June 20, 2011, by and between the Company and Wells Fargo Bank, N.A., as Trustee. (3)
4.2	Form of Note representing the Company’s 1.50% Convertible Senior Notes due 2018. (3)
4.3	Indenture, dated as of September 15, 2015, by and between the Company and Wells Fargo Bank, N.A., as Trustee. (4)
4.4	Form of Note representing the Company’s 1.0% Convertible Senior Notes due 2022 (included as Exhibit A to the Indenture filed as Exhibit 4.3). (4)
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL	Instance Document
101.SCH XBRL	Taxonomy Extension Schema
101.CAL XBRL	Taxonomy Extension Calculation Linkbase
101.DEF XBRL	Taxonomy Extension Definition Linkbase
101.LAB XBRL	Taxonomy Extension Label Linkbase
101.PRE XBRL	Taxonomy Extension Presentation Linkbase

___________________

(1) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K (File No. 001-34777) filed with the Securities and Exchange Commission on June 25, 2010 and incorporated herein by reference.

(2) Filed as Exhibit 3.1 to the registrant's Current Report on Form 8-K (File No. 001-34777) filed with the Securities and Exchange Commission on November 20, 2013 and incorporated herein by reference.

(3) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K (File No. 1-34777) filed with the Securities and Exchange Commission on June 21, 2011 and incorporated by reference herein.

(4) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K (File No. 1-34777) filed with the Securities and Exchange Commission on September 15, 2015 and incorporated by reference herein.

45

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BROADSOFT, INC.
By:	/s/ James A. Tholen
	James A. Tholen Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

Date: October 31, 2016

46

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Michael Tessler, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BroadSoft, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael Tessler

Michael Tessler

Chief Executive Officer

Date: October 31, 2016

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, James A. Tholen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BroadSoft, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ James A. Tholen

James A. Tholen

Chief Financial Officer

Date: October 31, 2016

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Michael Tessler, Chief Executive Officer of BroadSoft, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, to which this Certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael Tessler

Michael Tessler

Chief Executive Officer

(Principal Executive Officer)

Date: October 31, 2016

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), James A. Tholen, Chief Financial Officer of BroadSoft, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, to which this Certification is attached as Exhibit 32.2 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James A. Tholen

James A. Tholen

Chief Financial Officer

(Principal Financial Officer)

Date: October 31, 2016

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 27, 2016
Document Document And Entity Information [Abstract]
Entity Registrant Name	BROADSOFT, INC.
Entity Central Index Key	0001086909
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		30,143,503

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Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 100,047	$ 175,857
Short-term investments	149,354	72,531
Accounts receivable, net of allowance for doubtful accounts of $207 and $85 at September 30, 2016 and December 31, 2015, respectively	104,521	108,113
Other current assets	15,650	13,155
Total current assets	369,572	369,656
Long-term assets:
Property and equipment, net	19,948	19,481
Long-term investments	117,807	102,385
Intangible assets, net	21,805	18,835
Goodwill	79,710	72,275
Deferred tax assets	10,917	1,661
Other long-term assets	7,397	8,081
Total long-term assets	257,584	222,718
Total assets	627,156	592,374
Current liabilities:
Accounts payable and accrued expenses	32,102	28,667
Deferred revenue, current	96,034	106,483
Total current liabilities	128,136	135,150
Convertible senior notes	197,759	188,331
Deferred revenue	6,015	4,571
Other long-term liabilities	6,078	7,289
Total liabilities	337,988	335,341
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at September 30, 2016 and December 31, 2015; no shares issued and outstanding at September 30, 2016 and December 31, 2015	0	0
Common stock, par value $0.01 per share; 100,000,000 shares authorized at September 30, 2016 and December 31, 2015; 30,069,633 and 29,080,197 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively.	301	291
Additional paid-in capital	372,201	333,153
Accumulated other comprehensive loss	(17,009)	(13,810)
Accumulated deficit	(66,325)	(62,601)
Total stockholders’ equity	289,168	257,033
Total liabilities and stockholders’ equity	$ 627,156	$ 592,374

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 207	$ 85
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	30,069,633	29,080,197
Common stock, shares outstanding (in shares)	30,069,633	29,080,197

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Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenue:
License software	$ 31,486	$ 31,343	$ 95,992	$ 84,370
Subscription and maintenance support	36,509	29,828	106,348	82,263
Professional services and other	16,127	7,926	36,639	22,619
Total revenue	84,122	69,097	238,979	189,252
Cost of revenue:
License software	1,799	2,444	5,697	7,984
Subscription and maintenance support	11,894	9,787	34,060	28,958
Professional services and other	10,060	9,429	27,340	20,949
Total cost of revenue	23,753	21,660	67,097	57,891
Gross profit	60,369	47,437	171,882	131,361
Operating expenses:
Sales and marketing	26,112	20,738	75,386	59,852
Research and development	19,931	14,974	58,120	45,524
General and administrative	12,759	10,955	36,675	31,366
Total operating expenses	58,802	46,667	170,181	136,742
Income (loss) from operations	1,567	770	1,701	(5,381)
Other expense:
Interest expense	3,959	2,848	11,738	6,864
Interest income	(683)	(323)	(1,950)	(819)
Other, net	(207)	4,089	(533)	5,312
Total other expense, net	3,069	6,614	9,255	11,357
Loss before income taxes	(1,502)	(5,844)	(7,554)	(16,738)
Benefit from income taxes	(897)	(2,593)	(2,545)	(5,294)
Net loss	$ (605)	$ (3,251)	$ (5,009)	$ (11,444)
Net loss per common share:
Basic and diluted (in dollars per share)	$ (0.02)	$ (0.11)	$ (0.17)	$ (0.39)
Weighted average common shares outstanding:
Basic and diluted (in shares)	29,878	29,322	29,491	29,182
Stock-based compensation expense included above:
Stock-based compensation expense			$ 38,307	$ 30,387
Cost of revenue
Stock-based compensation expense included above:
Stock-based compensation expense	$ 2,225	$ 1,901	6,118	5,287
Sales and marketing
Stock-based compensation expense included above:
Stock-based compensation expense	4,973	2,812	13,321	10,048
Research and development
Stock-based compensation expense included above:
Stock-based compensation expense	4,249	2,428	11,414	8,933
General and administrative
Stock-based compensation expense included above:
Stock-based compensation expense	$ 2,574	$ 2,016	$ 7,454	$ 6,119

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Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net loss	$ (605)	$ (3,251)	$ (5,009)	$ (11,444)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	(637)	(1,133)	(4,171)	(3,118)
Unrealized gain (loss) on investments	(172)	112	972	155
Total other comprehensive loss, net of tax	(809)	(1,021)	(3,199)	(2,963)
Comprehensive loss	$ (1,414)	$ (4,272)	$ (8,208)	$ (14,407)

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Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock Par Value $0.01 Per Share	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Beginning Balance at Dec. 31, 2014	$ 212,961	$ 290	$ 258,169	$ (7,712)	$ (37,786)
Beginning Balance (in shares) at Dec. 31, 2014		28,943
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for exercise of stock options and vesting of RSUs and PSUs, net of effect of withholding tax	(4,539)	$ 6	(4,545)
Issuance of common stock for exercise of stock options and vesting of RSUs and PSUs, net of effect of withholding tax (in shares)		640
Repurchase of common stock	(25,002)	$ (8)			(24,994)
Repurchase of common stock (in shares)		(791)
Equity component of 2022 convertible senior notes issuance, net of issuance costs	67,792		67,792
Equity component of 2018 convertible senior notes repurchase	(6,751)		(6,751)
Deferred tax liability related to convertible senior notes, net	(23,446)		(23,446)
Stock-based compensation expense	30,595		30,595
Tax shortfall on exercise of stock options	753		753
Foreign currency translation adjustment	(3,118)			(3,118)
Unrealized gain on investments	155			155
Net loss	(11,444)				(11,444)
Ending Balance at Sep. 30, 2015	236,450	$ 288	321,061	(10,675)	(74,224)
Ending Balance (in shares) at Sep. 30, 2015		28,792
Beginning Balance at Dec. 31, 2015	257,033	$ 291	333,153	(13,810)	(62,601)
Beginning Balance (in shares) at Dec. 31, 2015		29,080
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for exercise of stock options and vesting of RSUs and PSUs, net of effect of withholding tax	828	$ 10	818
Issuance of common stock for exercise of stock options and vesting of RSUs and PSUs, net of effect of withholding tax (in shares)		990
Stock-based compensation expense	38,106		38,106
Tax shortfall on exercise of stock options	1,409		124		1,285
Foreign currency translation adjustment	(4,171)			(4,171)
Unrealized gain on investments	972			972
Net loss	(5,009)				(5,009)
Ending Balance at Sep. 30, 2016	$ 289,168	$ 301	$ 372,201	$ (17,009)	$ (66,325)
Ending Balance (in shares) at Sep. 30, 2016		30,070

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Unaudited Condensed Consolidated Statements of Stockholder's Equity (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015
Statement of Stockholders' Equity [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01

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Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net loss	$ (5,009)	$ (11,444)
Adjustment to reconcile net loss income to net cash provided by operating activities:
Depreciation and amortization	13,293	11,844
Amortization of software licenses	2,423	2,614
Stock-based compensation expense	38,307	30,387
Provision for doubtful accounts	207	6
Benefit from deferred income taxes	(5,923)	(5,585)
Excess tax benefit related to stock-based compensation	(197)	(1,247)
Non-cash interest expense on convertible senior notes	9,428	5,441
Payment of original convertible senior notes issuance discount	0	(1,094)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	4,788	(18,005)
Other current and long-term assets	(3,493)	(6,718)
Accounts payable, accrued expenses and other long-term liabilities	3,049	4,324
Current and long-term deferred revenue	(9,133)	7,723
Net cash provided by operating activities	47,740	18,246
Cash flows from investing activities:
Additions to property and equipment	(10,377)	(10,813)
Payments for acquisitions, net of cash acquired	(21,427)	(17,733)
Purchases of marketable securities	(207,896)	(155,333)
Proceeds from sale of marketable securities	73,251	101,933
Proceeds from maturities of marketable securities	42,400	57,251
Net cash used in investing activities	(124,049)	(24,695)
Cash flows from financing activities:
Proceeds from the exercise of stock options	13,866	2,983
Taxes paid on vesting of RSUs	(13,038)	(7,522)
Excess tax benefit related to stock-based compensation	197	1,247
Repurchase of common stock	0	(25,002)
Proceeds from issuance of 2022 convertible senior notes, net of issuance costs	0	194,822
Repurchase of 2018 convertible senior notes	0	(48,601)
Net cash provided by financing activities	1,025	117,927
Effect of exchange rate changes on cash and cash equivalents	(526)	(1,184)
Net increase (decrease) in cash and cash equivalents	(75,810)	110,294
Cash and cash equivalents, beginning of period	175,857	101,543
Cash and cash equivalents, end of period	$ 100,047	$ 211,837

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Nature of Business

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Nature of Business

Nature of Business

BroadSoft, Inc. (“BroadSoft” or the “Company”), a Delaware corporation, was formed in 1998. The Company is the leading global provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based Unified Communications, or UC, to their enterprise customers.

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Financial Statement Presentation

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Financial Statement Presentation

Financial Statement Presentation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.

Interim Financial Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification for interim financial information and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016 or any other period. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on February 29, 2016.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers: Topic 606 ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The standard's core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard allows entities to apply either of two adoption methods: (a) retrospective application to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (b) retrospective application with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Topic 606 ("ASU 2015-14"), which defers the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of adopting this new standard on its financial statements and the method of adoption.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases: Topic 842 ("ASU 2016-02"), which provides updated guidance on lease accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted. The Company is evaluating the impact of adopting this new standard on its financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation-Stock Compensation: Topic 718 ("ASU 2016-09"), which provides updated guidance on several aspects of the accounting for share-based payment transactions. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this guidance on January 1, 2017 and is evaluating the impact of this guidance on its financial statements.

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Investments and Fair Value Disclosures

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Investments and Fair Value Disclosures

Investments and Fair Value Disclosures

Investments in Marketable Securities

Marketable securities that the Company does not intend to hold to maturity are classified as available-for-sale, are carried at fair value and are included on the Company’s balance sheet as either short-term or long-term investments depending on their maturity. Investments with original maturities greater than three months that mature less than one year from the consolidated balance sheet date are classified as short-term investments. Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments. Available-for-sale investments are marked-to-market at the end of each reporting period, with unrealized holding gains or losses, which represent temporary changes in the fair value of the investment, reflected in accumulated other comprehensive loss, a separate component of stockholders’ equity. The Company’s primary objective when investing excess cash is preservation of principal. The following table summarizes the Company’s investments:

	September 30, 2016
	Contracted Maturity	Carrying Value
		(in thousands)
Money market funds	demand	$	43,405
Total cash equivalents		$	43,405
U.S. agency notes	70 - 365 days	$	59,706
Commercial paper	25 - 62 days	16,678
Corporate bonds	19 - 348 days	69,462
Asset-backed securities	199 days	3,508
Total short-term investments		$	149,354
U.S. agency notes	380 - 562 days	$	84,212
Corporate bonds	370 - 572 days	33,595
Total long-term investments		$	117,807

The following table summarizes the Company's investments at September 30, 2016 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	143,893	$	53	$	(28	)	$	143,918
Commercial paper	16,678		—		—			16,678
Corporate bonds	102,901		186		(30		)	103,057
Asset-backed securities	3,504		4		—			3,508
Total investments	$	266,976	$	243	$	(58	)	$	267,161

The following table summarizes the Company's investments at December 31, 2015 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	83,977	$	—	$	(334	)	$	83,643
Corporate bonds	91,537		2		(266		)	91,273
Total investments	$	175,514	$	2	$	(600	)	$	174,916

Fair Value

The following table summarizes the carrying and fair value of the Company’s financial assets (in thousands):

	September 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Cash equivalents*	$	43,405	$	43,405	$	123,170	$	123,170
Short and long-term investments	267,161		267,161		174,916		174,916
Total assets	$	310,566	$	310,566	$	298,086	$	298,086

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

The carrying amounts of the Company’s other financial instruments, accounts receivable, accounts payable and accrued expenses, approximate their respective fair values due to their short-term nature. (See Note 8 Borrowings for additional information on the fair value of debt.)

The Company uses a three-tier fair value measurement hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The three tiers are defined as follows:

• Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical instruments and include the Company’s investments in money market funds and certificates of deposit;

• Level 2. Inputs valued using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data and include the Company’s investments and marketable securities in U.S. agency notes, commercial paper, corporate bonds and asset-backed securities; and

• Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

Assets Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. This determination requires significant judgments to be made. There were no transfers between classification levels during the periods. The following tables summarize the values (in thousands):

	September 30, 2016		Level 1		Level 2		Level 3
Money market funds	$	43,405	$	43,405	$	—	$	—
Total cash equivalents*	43,405		43,405		—		—
U.S. agency notes	143,918		—		143,918		—
Commercial paper	16,678		—		16,678		—
Corporate bonds	103,057		—		103,057		—
Asset-backed securities	3,508		—		3,508		—
Total investments	267,161		—		267,161		—
Total cash equivalents and investments	$	310,566	$	43,405	$	267,161	$	—
	December 31, 2015		Level 1		Level 2		Level 3
Money market funds	$	123,170	$	123,170	$	—	$	—
Total cash equivalents*	123,170		123,170		—		—
U.S. agency notes	83,643		—		83,643		—
Corporate bonds	91,273		—		91,273		—
Total investments	174,916		—		174,916		—
Total cash equivalents and investments	$	298,086	$	123,170	$	174,916	$	—

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets, including property and equipment, goodwill and intangible assets, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be impaired. During the nine months ended September 30, 2016 and 2015, there were no assets or liabilities measured at fair value on a nonrecurring basis after initial recognition.

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Acquisitions

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Acquisitions

Acquisitions

Transera Communications, Inc.

On February 4, 2016, the Company completed its acquisition of all of the stock of Transera Communications, Inc. ("Transera"), which was renamed BroadSoft Contact Center, Inc. Transera provides cloud-based contact center software and the acquisition enables the Company to offer its customers a comprehensive cloud contact center solution that is complementary to, and integrates with, its BroadWorks and BroadCloud platform. The total consideration paid for Transera was $19.8 million, which was funded with cash on hand. The Company incurred $0.5 million of transaction costs for financial advisory and legal services related to the acquisition, which costs are included in general and administrative expenses as incurred, in the Company’s condensed consolidated statements of operations.

The condensed consolidated financial statements include the results of Transera from the date of acquisition. The purchase price has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date of February 4, 2016 (in thousands):

Cash and cash equivalents	$	365
Accounts receivable	1,623
Prepaid and other assets	285
Property and equipment	155
Deferred tax assets	3,495
Trade name	160
Customer relationships	4,100
Developed technology	3,050
Goodwill	7,826
Deferred revenue	(111		)
Accounts payable and accrued expenses	(1,148		)
Total consideration	$	19,800

The trade name represents the fair value of the Transera trade name that the Company intends to use for a fixed period of time. Customer relationships represent the fair value of the underlying relationships and agreements with Transera customers. Developed technology represents the fair value of Transera's intellectual property. The trade name, customer relationships and developed technology are being amortized on a straight-line basis over a period of three years, seven years and five years, respectively, which in general reflects the estimated cash flows to be generated from such assets. The weighted-average amortization period for depreciable intangible assets acquired is approximately six years.

The excess of purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired of $7.8 million was recorded as goodwill. The goodwill balance is attributable to the assembled workforce and the synergies expected as a result of the acquisition. In accordance with U.S. GAAP, goodwill associated with this acquisition will not be amortized but will be tested for impairment on an annual basis. Goodwill associated with this acquisition is not deductible for tax purposes.

Pro Forma Financial Information for Acquisition of Transera (unaudited)

Transera contributed revenue of $5.7 million and a net loss of $2.8 million for the period from the date of acquisition to September 30, 2016.

The unaudited pro forma statement of operations data below gives effect to the acquisition of Transera as if it had occurred on January 1, 2015. The following data includes adjustments for amortization of intangible assets and acquisition costs. This pro forma data is presented for information purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place on January 1, 2015.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenue	$	85,326		$	71,597		$	240,183		$	196,388
Net loss	(179		)	(3,909		)	(4,693		)	(12,677		)
Net loss per share:
Basic	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)
Diluted	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)

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Goodwill

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The following table provides a summary of the changes in the carrying amounts of goodwill (in thousands):

Balance as of December 31, 2015	$	72,275
Increase in goodwill related to acquisitions	8,604
Other	(1,169		)
Balance as of September 30, 2016	$	79,710

The increase in goodwill related to acquisitions consists of $7.8 million of goodwill related to the acquisition of Transera in February 2016, $1.0 million of goodwill related to the acquisition of an enterprise messaging-based team communication and collaboration software application company in May 2016 and a $(0.2) million measurement period adjustment related to a cloud-based communications provider in Japan acquired in November 2015. Any change in the goodwill amounts resulting from foreign currency translations are presented as “Other” in the above table.

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Deferred Revenue

9 Months Ended

Sep. 30, 2016

Revenue Recognition [Abstract]

Deferred Revenue

Deferred Revenue

Deferred revenue represents amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue is expected to be recognized as revenue within 12 months from the balance sheet date. Deferred revenue consisted of the following (in thousands):    

	September 30, 2016		December 31, 2015
License software	$	19,476	$	33,200
Subscription and maintenance support	58,154		61,399
Professional services and other	24,419		16,455
Total	$	102,049	$	111,054
Current portion	$	96,034	$	106,483
Non-current portion	6,015		4,571
Total	$	102,049	$	111,054

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Software Licenses

9 Months Ended

Sep. 30, 2016

Revenue Recognition [Abstract]

Software Licenses

Software Licenses

The Company has entered into an agreement with a third-party that provides the Company the right to distribute its software on an unlimited basis through December 2020.

For the period from June 2012 to May 2016, the Company had a fixed cost associated with these distribution rights of $10.2 million, which was amortized to cost of revenue over the four-year period beginning in June 2012, based on the straight line method.

For the period from June 2016 to December 2020, the Company has a fixed cost associated with these distribution rights of $17.3 million, and to the extent billed license software revenue over the extended term exceeds $850 million, the Company would be required to pay additional fees. The $17.3 million is being amortized to cost of revenue over the extended term beginning June 2016, based on the straight line method.

Amortization expense related to this agreement was $0.9 million and $0.6 million for the three months ended September 30, 2016 and 2015, respectively and $2.3 million and $1.9 million for the nine months ended September 30, 2016 and 2015, respectively.

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Borrowings

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Borrowings

Borrowings

2022 Convertible Senior Notes

In September 2015, the Company issued $201.3 million aggregate principal amount of 1.00% convertible senior notes due in 2022 (the “2022 Notes”). The 2022 Notes are general unsecured obligations of the Company, with interest payable semi-annually in cash at a rate of 1.00% per annum, and will mature on September 1, 2022, unless earlier converted, redeemed or repurchased.

The 2022 Notes may be converted by the holders at their option on any day prior to the close of business on the business day immediately preceding June 1, 2022 only under the following circumstances: (a) during any calendar quarter commencing after the calendar quarter ended on December 31, 2015 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (b) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price, as defined in the indenture governing the 2022 Notes (the "2022 Indenture"), per $1,000 principal amount of 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (c) if the Company calls any or all of the 2022 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant redemption date; or (d) upon the occurrence of specified corporate events.The 2022 Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, June 1, 2022 through the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate for the 2022 Notes is 25.8249 shares of the Company’s common stock per $1,000 principal amount of 2022 Notes, equivalent to a conversion price of approximately $38.72 per share of common stock. The conversion rate will be subject to adjustment in some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption on or after September 1, 2019 as described below, the Company will increase the conversion rate for a holder who elects to convert its 2022 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election. It is the Company's current intent to settle conversions through combination settlement with a specified dollar amount per $1,000 principal amount of 2022 Notes of $1,000. While the 2022 Notes were not convertible as of September 30, 2016, if the 2022 Notes were convertible, shares would have been distributed upon conversion because the conversion price was below the stock price as of such date.

Holders of the 2022 Notes may require the Company to repurchase some or all of the 2022 Notes for cash upon a fundamental change, as defined in the 2022 Indenture, at a repurchase price equal to 100% of the principal amount of the 2022 Notes being repurchased, plus any accrued and unpaid interest up to, but excluding, the relevant repurchase date.

The Company may not redeem the 2022 Notes prior to September 1, 2019. Beginning September 1, 2019, the Company may redeem for cash all or a portion of the 2022 Notes, at the Company's option, if the last reported sale price of the common stock is equal to or greater than 140% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within the five trading days immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2022 Notes.

The Company has separately accounted for the liability and equity components of the convertible debt instrument by allocating the gross proceeds from the issuance of the 2022 Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. This interest rate, estimated at 7.4%, was used to compute the initial fair value of the liability component of $131.3 million. The excess of the gross proceeds received from the issuance of the 2022 Notes over the initial amount allocated to the liability component of $70.0 million was allocated to the embedded conversion option, or equity component. This excess is reported as a debt discount and will be subsequently amortized as interest expense, using the interest method, through September 2022, the maturity date of the 2022 Notes. Offering costs, consisting of the initial purchasers’ discount and offering expenses payable by the Company, were $6.4 million. These offering costs were allocated to the liability component and the equity component based on the relative valuations of such components. As a result, $4.2 million of the offering costs were classified as debt issuance costs and recorded on the balance sheet as a deduction from the carrying amount of the debt liability. The remaining $2.2 million of offering costs were allocated to the equity component.

The fair value of the 2022 Notes as of September 30, 2016 and December 31, 2015 was $266.6 million and $221.1 million, respectively. The carrying amount of the equity component of the 2022 Notes was $61.6 million at September 30, 2016. The unamortized offering costs classified as debt issuance costs and recorded as a direct deduction to the carrying amount of the debt liability at September 30, 2016 were $3.6 million, which are being amortized as interest expense through the September 2022 maturity date of the 2022 Notes.

2018 Convertible Senior Notes

In June 2011, the Company issued $120.0 million aggregate principal amount of 1.50% convertible senior notes due in 2018 (the “2018 Notes”). The 2018 Notes are senior unsecured obligations of the Company, with interest payable semi-annually in cash at a rate of 1.50% per annum, and will mature on July 1, 2018, unless earlier repurchased, redeemed or converted.

Concurrently with the closing of the 2022 Notes offering, the Company repurchased $50.9 million principal amount of the 2018 Notes in privately negotiated transactions for an aggregate purchase price of $53.4 million. The Company recorded an extinguishment loss of $4.2 million on the repurchase, including $0.5 million associated with unamortized issuance costs. This loss was recorded in other expense within the consolidated statement of operations. The remaining purchase price was allocated between the liability component and the equity component based upon the fair value of the debt immediately prior to the repurchase at $42.4 million and $6.8 million, respectively.

The 2018 Notes may be converted by the holders at their option on any day prior to the close of business on the scheduled trading day immediately preceding April 1, 2018 only under the following circumstances: (a) during the five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the trading price per 2018 Note for each day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such day; (b) during any calendar quarter (and only during such quarter) after the calendar quarter ended June 30, 2012, if the last reported sale price of the common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (c) upon the occurrence of specified corporate events; or (d) if the Company calls the 2018 Notes for redemption. The 2018 Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, April 1, 2018 through the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate for the 2018 Notes is 23.8126 shares of the Company’s common stock per $1,000 principal amount of 2018 Notes, equivalent to a conversion price of approximately $41.99 per share of common stock. The conversion price will be subject to adjustment in some events, but will not be adjusted for accrued interest. In addition, if a make-whole fundamental change, as defined in the indenture governing the 2018 Notes (the “2018 Indenture”), occurs prior to the maturity date, the Company will in some cases increase the conversion rate for a holder that elects to convert its 2018 Notes in connection with such make-whole fundamental change. Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2018 Notes to be converted and deliver shares of the common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the 2018 Notes being converted. While the 2018 Notes were not convertible as of September 30, 2016, if the 2018 Notes were convertible, shares would have been distributed upon conversion because the conversion price was below the stock price as of such date.

Holders of the 2018 Notes may require the Company to repurchase some or all of the 2018 Notes for cash, subject to certain exceptions, upon a fundamental change, as defined in the 2018 Indenture, at a repurchase price equal to 100% of the principal amount of the 2018 Notes being repurchased, plus any accrued and unpaid interest up to but excluding the relevant repurchase date.

Beginning July 1, 2015, the Company may redeem for cash all or part of the 2018 Notes (except for the 2018 Notes that the Company is required to repurchase as described above) if the last reported sale price of the common stock exceeds 140% of the applicable conversion price for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day immediately prior to the date of the redemption notice. The redemption price will equal the sum of 100% of the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, plus a “make-whole premium” payment. The Company must make the make-whole premium payments on all 2018 Notes called for redemption prior to the maturity date, including 2018 Notes converted after the date the Company delivered the notice of redemption.

The Company has separately accounted for the liability and equity components of the convertible debt instrument by allocating the gross proceeds from the issuance of the 2018 Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. This interest rate, estimated at 8%, was used to compute the initial fair value of the liability component of $79.4 million. The excess of the gross proceeds received from the issuance of the 2018 Notes over the initial amount allocated to the liability component, of $40.6 million, was allocated to the embedded conversion option, or equity component. This excess is reported as a debt discount and subsequently amortized as interest expense, using the interest method, through July 2018, the maturity date of the 2018 Notes. Offering costs, consisting of the initial purchasers’ discount and offering expenses payable by the Company, were $4.3 million. These offering costs were allocated to the liability component and the equity component based on the relative valuations of such components. As a result, $2.9 million of the offering costs were classified as debt issuance costs and recorded on the balance sheet in other assets. The remaining $1.4 million of offering costs were allocated to the equity component.

The fair value of the 2018 Notes as of September 30, 2016 and December 31, 2015 was $84.3 million and $75.3 million, respectively. The carrying amount of the equity component of the 2018 Notes was $7.0 million at September 30, 2016. The unamortized offering costs classified as debt issuance costs and recorded as a direct deduction to the carrying amount of the debt liability at September 30, 2016 were $0.4 million, which is being amortized as interest expense through the July 2018 maturity date of the 2018 Notes.

The following table shows the amounts recorded within the Company’s financial statements with respect to the combined 2022 Notes and the 2018 Notes (collectively, the "Notes") (in thousands):

	September 30, 2016			December 31, 2015
Convertible debt principal	$	270,355		$	270,355
Unamortized debt discount	(68,637		)	(77,440		)
Unamortized debt issuance costs	(3,959		)	(4,584		)
Net carrying amount of convertible debt	$	197,759		$	188,331

The following table presents the interest expense recognized related to the Notes (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Contractual interest expense	$	762	$	523	$	2,310	$	1,423
Amortization of debt issuance costs	208		610		625		813
Accretion of debt discount	2,989		1,715		8,803		4,628
Net interest expense	$	3,959	$	2,848	$	11,738	$	6,864

The fair value for the Company’s borrowings is estimated using quoted market prices of the Notes at September 30, 2016, quoted market prices for similar instruments and by observable market data. The Company believes its creditworthiness and the financial market in which it operates have not materially changed since entering into the arrangements. If measured at fair value in the financial statements, long-term debt would be classified as Level 2 in the fair value hierarchy.

The aggregate maturities of borrowings as of September 30, 2016 were as follows (in thousands):

2016 - 2017	$	—
2018	69,105
2019	—
2020 and thereafter	201,250
	$	270,355

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Stock-based Compensation

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock-based Compensation

Equity Incentive Plans

In 1999, the Company adopted the 1999 Stock Incentive Plan (the “1999 Plan”). The 1999 Plan provided for the grant of incentive stock options, nonqualified stock options, restricted stock awards and stock appreciation rights. The 1999 Plan terminated in June 2009 whereby no new options or awards are permitted to be granted. In April 2009, the Company adopted the 2009 Equity Incentive Plan. This plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units (“RSUs”) and stock appreciation rights. In June 2010, in connection with the Company’s initial public offering (“IPO”), the 2009 Equity Incentive Plan was amended and restated to provide for, among other things, annual increases in the share reserve (as amended and restated, the “2009 Plan”).

The term of stock-based grants is up to ten years, except that certain stock-based grants made after 2005 have a term of five years. For grants made under the 2009 Plan prior to January 1, 2015, the requisite vesting period is typically four years and for grants made subsequent to January 1, 2015, the requisite vesting period is typically three years. On each of January 1, 2015 and 2016, 1,250,000 shares were added to the 2009 Plan. At September 30, 2016, the Company had 794,538 shares of common stock available for issuance under the 2009 Plan.

Stock-based compensation expense recognized by the Company was as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016		2015
Stock options	$	2,009	$	2,212		$	6,156	$	5,563
Restricted stock units	11,365		8,043			30,930		24,032
Performance stock units	647		(1,098		)	1,221		792
Total recognized stock-based compensation expense	$	14,021	$	9,157		$	38,307	$	30,387

Stock Options

The following table presents summary information related to stock options:

	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2015	1,998,875		$	29.48
Granted	483,450		35.66
Exercised	(428,424	)	32.36
Forfeited	(130,530	)	32.26
Expired	(10,373	)	32.84
Balance, September 30, 2016	1,912,998		$	30.18	7.36	$31,317
Vested and Exercisable, September 30, 2016	900,953		$	27.27	5.69	$17,375

During the nine months ended September 30, 2016 and 2015, the Company granted stock options with a weighted-average grant date fair value of $16.14 and $15.73, respectively. For the nine months ended September 30, 2016 and 2015, the intrinsic value of stock options exercised was $4.3 million and $3.7 million, respectively, and cash received from stock options exercised was $13.9 million and $3.0 million, respectively.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested stock options was $13.6 million, which is scheduled to be recognized over a weighted average period of 1.94 years. To the extent the actual forfeiture rate is different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Restricted Stock Units

The following table presents a summary of activity for RSUs (excluding RSUs that are subject to performance-based vesting conditions (“PSUs”)):

	Number of RSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	1,512,022		$	33.19
Granted	1,444,344		38.04
Vested	(803,246	)	34.02
Forfeited	(93,703	)	34.60
Balance, September 30, 2016	2,059,417		$	36.23

The RSUs generally vest over three or four years from the vesting commencement date and on vesting the holder receives one share of common stock for each RSU.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested RSUs was $61.0 million, which is scheduled to be recognized over a weighted average period of 1.97 years. To the extent the actual forfeiture rate is different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Performance Stock Units

The following table presents a summary of activity for PSUs:

	Number of PSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	550,088		$	26.87
Granted	—		—
Vested	(75,463	)	32.96
Forfeited	(1,641	)	23.72
Balance, September 30, 2016	472,984		$	25.91

The PSUs generally vest over three or four years from the vesting commencement date, subject to the satisfaction of certain performance conditions, and on vesting the holder receives one share of common stock for each PSU.

During the three months ended September 30, 2015, the Company reversed $1.4 million of expense related to the change in estimate of the number of shares expected to vest based upon the satisfaction of certain financial performance conditions.

At September 30, 2016, unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested PSUs was $0.2 million, which is scheduled to be recognized over a weighted average period of 0.66 years. To the extent the actual forfeiture rate or estimated financial performance conditions are different than what the Company has anticipated at September 30, 2016, stock-based compensation expense will be different from expectations.

Tax Benefits

In accordance with the FASB’s guidance on stock-based compensation, the Company elected the alternative transition method (short cut method) provided for calculating the tax effects of stock-based compensation. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows related to the tax effect of employee stock-based compensation awards that are outstanding upon adoption. As of September 30, 2016, the balance of the Company’s APIC pool related to tax windfall benefits from stock option exercises was $10.9 million.

The Company applies a with-and-without approach in determining its intra-period allocation of tax expense or benefit attributable to stock-based compensation deductions. Tax deductions in excess of previously recorded benefits (windfalls) included in net operating loss carryforwards but not reflected in deferred tax assets were $53.5 million and $50.4 million at September 30, 2016 and December 31, 2015, respectively.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In the normal course of business, the Company enters into contracts and agreements that may contain representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made in the future, but have not yet been made. The Company has not paid any material claims related to indemnification obligations to date.

In accordance with its bylaws and certain agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date under these indemnification obligations.

In addition, the Company is involved in litigation incidental to the conduct of its business. The Company is not a party to any lawsuit or proceeding that, in the opinion of management, is reasonably possible to have a material adverse effect on its financial position, results of operations or cash flows.

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Taxes

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Taxes

Taxes

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate on a consolidated basis in accordance with the accounting guidance for income taxes. Where the Company has entities with losses and does not expect to realize the tax benefits in the foreseeable future, those entities are excluded from the effective tax rate calculation. Non-recurring and discrete items that impact tax expense are recorded in the period incurred.

The effective tax rate was 33.7% and 31.6% for the nine months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, the effective tax rate differs from the computed U.S. statutory rate primarily due to nondeductible expenses related to stock-based compensation, other compensation items and losses from certain foreign jurisdictions with no associated tax benefit due to a full valuation allowance, partially offset by research and development and business credits. Included in the effective tax rate for the nine months ended September 30, 2016 is a discrete benefit of $2.1 million related to additional U.S. research and development credits claimed for the prior years.

As of September 30, 2016, the Company has not recorded a deferred tax liability for undistributed earnings of $10.8 million of certain foreign subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed, the Company would be subject to federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets in each relevant jurisdiction. The Company provides a valuation allowance against deferred tax assets if, based upon the weight of available evidence, we do not believe it is “more-likely-than-not” that some or all of the deferred tax assets will be realized. Realization of deferred tax assets in any jurisdictions depends on various factors, including the expectation of future profitability in that jurisdiction.

Realization of the U.S. deferred tax asset is dependent on generating sufficient taxable income prior to expiration of these U.S. loss carryforwards.  During the prior years and currently, the Company experienced losses in its U.S. jurisdiction, driven largely by significant stock-based compensation expense recorded in those years. Although realization is not assured, management believes it is more-likely-than-not that the results of U.S. operations will generate sufficient taxable income to support the realization of the existing deferred tax asset and any excess stock-based compensation deduction carryforwards prior to the expiration of those losses. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

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Income (loss) per share data

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Income per share data

Income (loss) per share data

Basic income per common share is computed based on the weighted average number of outstanding shares of common stock. Diluted income per common share adjusts the basic weighted average common shares outstanding for the potential dilution that could occur if stock options, RSUs and convertible securities were exercised or converted into common stock.

The following table presents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation. In the table below, net loss represents the numerator and weighted average common shares outstanding represent the denominator:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
Weighted average common shares outstanding, basic and diluted	29,878			29,322			29,491			29,182
Net loss per share, basic and diluted	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)

Due to the settlement features of the Notes, the Company only includes the impact of the premium feature in the diluted earnings per common share calculation when the average stock price exceeds the conversion price of the Notes. The weighted average number of shares outstanding used in the computation of diluted loss per share does not include the effect of the premium feature of the 2022 Notes convertible into 686,211 and 167,570 shares for the three and nine months ended September 30,2016, respectively, and does not include the effect of the premium feature of the 2018 Notes convertible into 96,636 share for the three months ended September 30, 2016, as the effect would have been anti-dilutive given the Company's loss for these periods. The average stock price did not exceed the conversion price for the 2022 Notes for the three and nine months ended September 30,2015 or exceed the conversion price for the 2018 Notes for the nine months ended September 30,2016 and the three and nine months ended September 30,2015.

The weighted average number of shares outstanding used in the computation of diluted loss per share does not include the effect of stock-based awards convertible into 923,561 and 508,377 shares for the three months ended September 30, 2016 and 2015, respectively, and into 888,171 and 633,990 shares for the nine months ended September 30, 2016 and 2015, respectively, as the effect would have been anti-dilutive given the Company’s losses for these periods.

The weighted average number of shares outstanding used in the computation of diluted loss per share also does not include the effect of certain additional stock-based awards exercisable into 265,546 and 1,488,820 shares for the three months ended September 30, 2016 and 2015, respectively, and into 1,090,717 and 1,606,984 shares for the nine months ended September 30, 2016 and 2015, respectively, as their effect would have been anti-dilutive because their exercise prices exceeded the average market price of the Company's common stock during these periods.

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Segment and Geographic Information

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment and Geographic Information

Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its chief executive officer (the “CEO”). The CEO reviews financial information presented on a consolidated basis, along with information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. Discrete information on a geographic basis, except for revenue, is not provided below the consolidated level to the CEO. The Company has concluded that it operates in one segment and has provided the required enterprise-wide disclosures.

The Company engages in business across three geographic regions: North America; Europe, Middle East and Africa ("EMEA"); and Asia Pacific, the Caribbean and Latin America ("Emerging Markets"). Revenue by geographic area is based on the location of the service provider. The following tables present revenue and long-lived assets, net, by geographic area (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Revenue:
North America	$	46,696	$	40,028	$	132,545	$	114,319
EMEA	23,531		16,625		68,000		48,194
Emerging Markets	13,895		12,444		38,434		26,739
Total Revenues	$	84,122	$	69,097	$	238,979	$	189,252

North America includes $38.5 million and $36.9 million of United States revenue for each of the three months ended September 30, 2016 and 2015 and $119.4 million and $107.9 million for each of the nine months ended September 30, 2016 and 2015.

	September 30, 2016		December 31, 2015
Long-Lived Assets, net
North America	$	20,671	$	21,135
EMEA	2,742		5,008
Emerging Markets	3,704		1,171
Total Long-Lived Assets, net	$	27,117	$	27,314

North America includes $20.3 million and $20.9 million of United States long-lived assets as of September 30, 2016 and December 31, 2015.

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Subsequent Events

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On October 28, 2016, the Company completed its acquisition of all of the outstanding units of VoIP Logic, LLC, a wholesale provider of BroadWorks-based cloud communications services. This cloud offering will be added to the Company's BroadCloud portfolio and addresses the needs of service providers who want greater control of their platform and to maintain their own administrative systems. The total consideration paid for VoIP Logic was $13.4 million, funded with cash on hand. The Company has not yet allocated the purchase price to the acquired assets and liabilities.

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Financial Statement Presentation (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.

Interim Financial Presentation

Interim Financial Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification for interim financial information and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016 or any other period. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on February 29, 2016.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers: Topic 606 ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The standard's core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard allows entities to apply either of two adoption methods: (a) retrospective application to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (b) retrospective application with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Topic 606 ("ASU 2015-14"), which defers the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of adopting this new standard on its financial statements and the method of adoption.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases: Topic 842 ("ASU 2016-02"), which provides updated guidance on lease accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted. The Company is evaluating the impact of adopting this new standard on its financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation-Stock Compensation: Topic 718 ("ASU 2016-09"), which provides updated guidance on several aspects of the accounting for share-based payment transactions. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this guidance on January 1, 2017 and is evaluating the impact of this guidance on its financial statements.

Investments in Marketable Securities

Investments in Marketable Securities

Marketable securities that the Company does not intend to hold to maturity are classified as available-for-sale, are carried at fair value and are included on the Company’s balance sheet as either short-term or long-term investments depending on their maturity. Investments with original maturities greater than three months that mature less than one year from the consolidated balance sheet date are classified as short-term investments. Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments. Available-for-sale investments are marked-to-market at the end of each reporting period, with unrealized holding gains or losses, which represent temporary changes in the fair value of the investment, reflected in accumulated other comprehensive loss, a separate component of stockholders’ equity. The Company’s primary objective when investing excess cash is preservation of principal.

Fair Value Measurements

Assets Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets, including property and equipment, goodwill and intangible assets, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be impaired.

The Company uses a three-tier fair value measurement hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The three tiers are defined as follows:

• Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical instruments and include the Company’s investments in money market funds and certificates of deposit;

• Level 2. Inputs valued using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data and include the Company’s investments and marketable securities in U.S. agency notes, commercial paper, corporate bonds and asset-backed securities; and

• Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

Assets Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. This determination requires significant judgments to be made.

Deferred Revenue

Deferred revenue represents amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue is expected to be recognized as revenue within 12 months from the balance sheet date.

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Investments and Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Summary of Long-Term Investments

The following table summarizes the Company’s investments:

	September 30, 2016
	Contracted Maturity	Carrying Value
		(in thousands)
Money market funds	demand	$	43,405
Total cash equivalents		$	43,405
U.S. agency notes	70 - 365 days	$	59,706
Commercial paper	25 - 62 days	16,678
Corporate bonds	19 - 348 days	69,462
Asset-backed securities	199 days	3,508
Total short-term investments		$	149,354
U.S. agency notes	380 - 562 days	$	84,212
Corporate bonds	370 - 572 days	33,595
Total long-term investments		$	117,807

Unrealized Gain (Loss) on Investments

The following table summarizes the Company's investments at September 30, 2016 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	143,893	$	53	$	(28	)	$	143,918
Commercial paper	16,678		—		—			16,678
Corporate bonds	102,901		186		(30		)	103,057
Asset-backed securities	3,504		4		—			3,508
Total investments	$	266,976	$	243	$	(58	)	$	267,161

The following table summarizes the Company's investments at December 31, 2015 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. agency notes	$	83,977	$	—	$	(334	)	$	83,643
Corporate bonds	91,537		2		(266		)	91,273
Total investments	$	175,514	$	2	$	(600	)	$	174,916

Summary of Carrying and Fair Value of Company's Financial Assets

The following table summarizes the carrying and fair value of the Company’s financial assets (in thousands):

	September 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Cash equivalents*	$	43,405	$	43,405	$	123,170	$	123,170
Short and long-term investments	267,161		267,161		174,916		174,916
Total assets	$	310,566	$	310,566	$	298,086	$	298,086

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize the values (in thousands):

	September 30, 2016		Level 1		Level 2		Level 3
Money market funds	$	43,405	$	43,405	$	—	$	—
Total cash equivalents*	43,405		43,405		—		—
U.S. agency notes	143,918		—		143,918		—
Commercial paper	16,678		—		16,678		—
Corporate bonds	103,057		—		103,057		—
Asset-backed securities	3,508		—		3,508		—
Total investments	267,161		—		267,161		—
Total cash equivalents and investments	$	310,566	$	43,405	$	267,161	$	—
	December 31, 2015		Level 1		Level 2		Level 3
Money market funds	$	123,170	$	123,170	$	—	$	—
Total cash equivalents*	123,170		123,170		—		—
U.S. agency notes	83,643		—		83,643		—
Corporate bonds	91,273		—		91,273		—
Total investments	174,916		—		174,916		—
Total cash equivalents and investments	$	298,086	$	123,170	$	174,916	$	—

* Excludes $56.6 million and $52.7 million of operating cash balances as of September 30, 2016 and December 31, 2015, respectively.

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date of February 4, 2016 (in thousands):

Cash and cash equivalents	$	365
Accounts receivable	1,623
Prepaid and other assets	285
Property and equipment	155
Deferred tax assets	3,495
Trade name	160
Customer relationships	4,100
Developed technology	3,050
Goodwill	7,826
Deferred revenue	(111		)
Accounts payable and accrued expenses	(1,148		)
Total consideration	$	19,800

Business Acquisition, Pro Forma Information

This pro forma data is presented for information purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place on January 1, 2015.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenue	$	85,326		$	71,597		$	240,183		$	196,388
Net loss	(179		)	(3,909		)	(4,693		)	(12,677		)
Net loss per share:
Basic	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)
Diluted	$	(0.01	)	$	(0.13	)	$	(0.16	)	$	(0.43	)

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Goodwill (Tables)

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table provides a summary of the changes in the carrying amounts of goodwill (in thousands):

Balance as of December 31, 2015	$	72,275
Increase in goodwill related to acquisitions	8,604
Other	(1,169		)
Balance as of September 30, 2016	$	79,710

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Deferred Revenue (Tables)

9 Months Ended

Sep. 30, 2016

Revenue Recognition [Abstract]

Schedule of Deferred Revenue

Deferred revenue consisted of the following (in thousands):    

	September 30, 2016		December 31, 2015
License software	$	19,476	$	33,200
Subscription and maintenance support	58,154		61,399
Professional services and other	24,419		16,455
Total	$	102,049	$	111,054
Current portion	$	96,034	$	106,483
Non-current portion	6,015		4,571
Total	$	102,049	$	111,054

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Summary of Company's Financial Statements

The following table shows the amounts recorded within the Company’s financial statements with respect to the combined 2022 Notes and the 2018 Notes (collectively, the "Notes") (in thousands):

	September 30, 2016			December 31, 2015
Convertible debt principal	$	270,355		$	270,355
Unamortized debt discount	(68,637		)	(77,440		)
Unamortized debt issuance costs	(3,959		)	(4,584		)
Net carrying amount of convertible debt	$	197,759		$	188,331

Summary of Interest Expense Recognized

The following table presents the interest expense recognized related to the Notes (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Contractual interest expense	$	762	$	523	$	2,310	$	1,423
Amortization of debt issuance costs	208		610		625		813
Accretion of debt discount	2,989		1,715		8,803		4,628
Net interest expense	$	3,959	$	2,848	$	11,738	$	6,864

Aggregate Maturities of Borrowings

The aggregate maturities of borrowings as of September 30, 2016 were as follows (in thousands):

2016 - 2017	$	—
2018	69,105
2019	—
2020 and thereafter	201,250
	$	270,355

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock-based Compensation Expense Recognized by Company

Stock-based compensation expense recognized by the Company was as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016		2015
Stock options	$	2,009	$	2,212		$	6,156	$	5,563
Restricted stock units	11,365		8,043			30,930		24,032
Performance stock units	647		(1,098		)	1,221		792
Total recognized stock-based compensation expense	$	14,021	$	9,157		$	38,307	$	30,387

Summary of Information Related to Stock Options

The following table presents summary information related to stock options:

	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2015	1,998,875		$	29.48
Granted	483,450		35.66
Exercised	(428,424	)	32.36
Forfeited	(130,530	)	32.26
Expired	(10,373	)	32.84
Balance, September 30, 2016	1,912,998		$	30.18	7.36	$31,317
Vested and Exercisable, September 30, 2016	900,953		$	27.27	5.69	$17,375

Summary of Activity for RSUs (Excluding RSUs that are Subject to Performance-Based Vesting Conditions)

The following table presents a summary of activity for RSUs (excluding RSUs that are subject to performance-based vesting conditions (“PSUs”)):

	Number of RSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	1,512,022		$	33.19
Granted	1,444,344		38.04
Vested	(803,246	)	34.02
Forfeited	(93,703	)	34.60
Balance, September 30, 2016	2,059,417		$	36.23

Summary of Activity for PSUs

The following table presents a summary of activity for PSUs:

	Number of PSUs		Weighted Average Grant Date Fair Value
Balance, December 31, 2015	550,088		$	26.87
Granted	—		—
Vested	(75,463	)	32.96
Forfeited	(1,641	)	23.72
Balance, September 30, 2016	472,984		$	25.91

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Income (loss) per share data (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Summary of Reconciliation of Numerator and Denominator of Earnings per Share Computation

The following table presents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation. In the table below, net loss represents the numerator and weighted average common shares outstanding represent the denominator:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Net loss	$	(605	)	$	(3,251	)	$	(5,009	)	$	(11,444	)
Weighted average common shares outstanding, basic and diluted	29,878			29,322			29,491			29,182
Net loss per share, basic and diluted	$	(0.02	)	$	(0.11	)	$	(0.17	)	$	(0.39	)

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Segment and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Summary of Revenue and Long-Lived Assets, Net, by Geographic Area

The following tables present revenue and long-lived assets, net, by geographic area (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Revenue:
North America	$	46,696	$	40,028	$	132,545	$	114,319
EMEA	23,531		16,625		68,000		48,194
Emerging Markets	13,895		12,444		38,434		26,739
Total Revenues	$	84,122	$	69,097	$	238,979	$	189,252

North America includes $38.5 million and $36.9 million of United States revenue for each of the three months ended September 30, 2016 and 2015 and $119.4 million and $107.9 million for each of the nine months ended September 30, 2016 and 2015.

	September 30, 2016		December 31, 2015
Long-Lived Assets, net
North America	$	20,671	$	21,135
EMEA	2,742		5,008
Emerging Markets	3,704		1,171
Total Long-Lived Assets, net	$	27,117	$	27,314

North America includes $20.3 million and $20.9 million of United States long-lived assets as of September 30, 2016 and December 31, 2015.

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Investments and Fair Value Disclosures - Summary of Company's Investments (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Schedule Of Investments In Marketable Securities [Line Items]
Cash equivalents, Carrying Value	$ 43,405
Short-term investments, Carrying Value	149,354	$ 72,531
Long-term investments, Carrying Value	$ 117,807	$ 102,385
Money market funds
Schedule Of Investments In Marketable Securities [Line Items]
Cash equivalents, Contracted Maturity	demand
Cash equivalents, Carrying Value	$ 43,405
U.S. agency notes
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investments, Carrying Value	59,706
Long-term investments, Carrying Value	$ 84,212
U.S. agency notes | Minimum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	138 days
Long-term investments, Contracted Maturity	457 days
U.S. agency notes | Maximum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	365 days
Long-term investments, Contracted Maturity	654 days
Commercial paper
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investments, Carrying Value	$ 16,678
Commercial paper | Minimum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	117 days
Commercial paper | Maximum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	154 days
Corporate bonds
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investments, Carrying Value	$ 69,462
Long-term investments, Carrying Value	$ 33,595
Corporate bonds | Minimum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	12 days
Long-term investments, Contracted Maturity	379 days
Corporate bonds | Maximum
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	358 days
Long-term investments, Contracted Maturity	664 days
Asset-backed securities
Schedule Of Investments In Marketable Securities [Line Items]
Short-term investment, Contracted Maturity	199 days
Short-term investments, Carrying Value	$ 3,508

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Investments and Fair Value Disclosures - Summary of Carrying and Fair Value of Company's Financial Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Investments, Cost	$ 266,976	$ 175,514
Investments, Gross Unrealized Gains	243	2
Investments, Gross Unrealized Losses	(58)	(600)
Investments, Fair Value	267,161	174,916
Cash equivalents and certificates of deposit, Carrying Value	43,405	123,170
Short and long-term investments, Carrying Value	267,161	174,916
Total assets, Carrying Value	310,566	298,086
Cash equivalents	43,405	123,170
Short and long-term investments, Fair Value	267,161	174,916
Total assets, Fair value	310,566	298,086
Operating cash balance excluded from cash equivalents	56,600	52,700
U.S. agency notes
Schedule of Available-for-sale Securities [Line Items]
Investments, Cost	143,893	83,977
Investments, Gross Unrealized Gains	53	0
Investments, Gross Unrealized Losses	(28)	(334)
Investments, Fair Value	143,918	83,643
Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Investments, Cost	16,678
Investments, Gross Unrealized Gains	0
Investments, Gross Unrealized Losses	0
Investments, Fair Value	16,678
Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Investments, Cost	102,901	91,537
Investments, Gross Unrealized Gains	186	2
Investments, Gross Unrealized Losses	(30)	(266)
Investments, Fair Value	103,057	$ 91,273
Asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Investments, Cost	3,504
Investments, Gross Unrealized Gains	4
Investments, Gross Unrealized Losses	0
Investments, Fair Value	$ 3,508

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Investments and Fair Value Disclosures - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 43,405	$ 123,170
Short and long-term investments	267,161	174,916
Total assets, Fair value	310,566	298,086
Operating cash balance excluded from cash equivalents	56,600	52,700
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	43,405	123,170
Short and long-term investments	267,161	174,916
Total assets, Fair value	310,566	298,086
Recurring | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	43,405	123,170
Recurring | U.S. agency notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	143,918	83,643
Recurring | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	16,678
Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	103,057	91,273
Recurring | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	3,508
Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	43,405	123,170
Short and long-term investments	0	0
Total assets, Fair value	43,405	123,170
Recurring | Level 1 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	43,405	123,170
Recurring | Level 1 | U.S. agency notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0	0
Recurring | Level 1 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0
Recurring | Level 1 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0	0
Recurring | Level 1 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0
Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short and long-term investments	267,161	174,916
Total assets, Fair value	267,161	174,916
Recurring | Level 2 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Recurring | Level 2 | U.S. agency notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	143,918	83,643
Recurring | Level 2 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	16,678
Recurring | Level 2 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	103,057	91,273
Recurring | Level 2 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	3,508
Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short and long-term investments	0	0
Total assets, Fair value	0	0
Recurring | Level 3 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Recurring | Level 3 | U.S. agency notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0	0
Recurring | Level 3 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0
Recurring | Level 3 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	0	$ 0
Recurring | Level 3 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short and long-term investments	$ 0

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Acquisitions - Additional Information (Details) - USD ($) $ in Thousands		9 Months Ended
	Feb. 04, 2016	Sep. 30, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill		$ 79,710	$ 72,275
Transera, Inc.
Business Acquisition [Line Items]
Consideration paid	$ 19,800
Transaction costs	$ 500
Weighted average amortization period for intangible assets	6 years
Goodwill	$ 7,826
Aggregate revenue of business acquisition		5,700
Aggregate loss of business acquisition		$ (2,800)
Transera, Inc. | Trade Names
Business Acquisition [Line Items]
Useful life (in years)	3 years
Transera, Inc. | Customer Relationships
Business Acquisition [Line Items]
Useful life (in years)	7 years
Transera, Inc. | Developed Technology Rights
Business Acquisition [Line Items]
Useful life (in years)	5 years

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Acquisitions - Fair Value of the Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Feb. 04, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill	$ 79,710		$ 72,275
Transera, Inc.
Business Acquisition [Line Items]
Cash and cash equivalents		$ 365
Accounts receivable		1,623
Prepaid and other assets		285
Trade name		155
Deferred tax assets		3,495
Trade name		160
Customer relationships		4,100
Customer relationships		3,050
Goodwill		7,826
Deferred revenue		(111)
Accounts payable and accrued expenses		(1,148)
Total consideration		$ 19,800

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Acquisitions - Pro Forma Financial Information (Details) - Transera, Inc. - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Business Acquisition [Line Items]
Revenue	$ 85,326	$ 71,597	$ 240,183	$ 196,388
Net income (loss)	$ (179)	$ (3,909)	$ (4,693)	$ (12,677)
Net income (loss) per share:
Basic (in dollars per share)	$ (0.01)	$ (0.13)	$ (0.16)	$ (0.43)
Diluted (in dollars per share)	$ (0.01)	$ (0.13)	$ (0.16)	$ (0.43)

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Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($)
Goodwill [Roll Forward]
Balance as of December 31, 2015	$ 72,275
Increase in goodwill related to acquisitions	8,604
Other	(1,169)
Balance as of September 30, 2016	79,710
Transera, Inc.
Goodwill [Roll Forward]
Increase in goodwill related to acquisitions	7,800
Collaboration Software Application Company
Goodwill [Roll Forward]
Increase in goodwill related to acquisitions	1,000
Measurement period adjustment to goodwill acquired during period	$ (200)

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Deferred Revenue - Schedule of Deferred Revenue (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Deferred Revenue Arrangement [Line Items]
Deferred revenue	$ 102,049	$ 111,054
Current portion	96,034	106,483
Non-current portion	6,015	4,571
Total	102,049	111,054
License software
Deferred Revenue Arrangement [Line Items]
Deferred revenue	19,476	33,200
Total	19,476	33,200
Subscription and maintenance support
Deferred Revenue Arrangement [Line Items]
Deferred revenue	58,154	61,399
Total	58,154	61,399
Professional services and other
Deferred Revenue Arrangement [Line Items]
Deferred revenue	24,419	16,455
Total	$ 24,419	$ 16,455

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Software Licenses - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended		48 Months Ended	55 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	May 31, 2016	Dec. 31, 2020
Deferred Revenue Arrangement [Line Items]
Additional cost for amortized cost of revenue					$ 10,200,000
Extent of billed license revenue, period (in years)					4 years
Amortization expense related to agreements	$ 900,000	$ 600,000	$ 2,300,000	$ 1,900,000
Scenario, Forecast
Deferred Revenue Arrangement [Line Items]
Additional cost for amortized cost of revenue						$ 17,300,000
Extent of billed license revenue						$ 850,000,000

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Borrowings - Additional Information (Detail)	1 Months Ended
	Sep. 30, 2015 USD ($) d $ / shares	Jun. 30, 2011 USD ($) d $ / shares	Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Aggregate principal amount issued			$ 270,355,000	$ 270,355,000
Unamortized offering costs			3,959,000	4,584,000
Senior Notes | 2022 Convertible Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount issued	$ 201,300,000
Coupon rate of notes (as a percent)	1.00%
Debt conversion, principal amount	$ 1,000
Debt instrument conversion ratio	0.0258249
Conversion price of Notes (in dollars per share) | $ / shares	$ 38.72
Redemption percentage	100.00%
Interest rate estimated (as a percent)	7.40%
Debt instrument initial fair value of liability component	$ 131,300,000
Debt instrument initial component of liability allocated to equity component Convertible, Initial Carrying Amount of Equity Component	70,000,000
Debt issuance cost and debt discount	6,400,000
Debt issuance cost	4,200,000
Debt issuance cost and debt discount, equity portion	$ 2,200,000
Fair value of the Notes			266,600,000	221,100,000
Amount allocated to the embedded conversion option			61,600,000
Unamortized offering costs			3,600,000
Senior Notes | 2022 Convertible Senior Notes | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Trading days | d	20
Consecutive trading days	30 days
Redemption percentage, conversion threshold	130.00%
Senior Notes | 2022 Convertible Senior Notes | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Trading days | d	5
Consecutive trading days	10 days
Redemption percentage, conversion threshold	98.00%
Senior Notes | 2022 Convertible Senior Notes | Debt Instrument, Redemption, Period Three
Debt Instrument [Line Items]
Trading days | d	20
Consecutive trading days	30 days
Redemption percentage, conversion threshold	140.00%
Redemption percentage	100.00%
Senior Notes | 2018 Convertible Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount issued		$ 120,000,000.0
Coupon rate of notes (as a percent)		1.50%
Redemption percentage, conversion threshold		140.00%
Debt conversion, principal amount		$ 1,000
Debt instrument conversion ratio		0.0238126
Conversion price of Notes (in dollars per share) | $ / shares		$ 41.99
Redemption percentage		100.00%
Interest rate estimated (as a percent)		8.00%
Debt instrument initial fair value of liability component		$ 79,400,000
Debt instrument initial component of liability allocated to equity component Convertible, Initial Carrying Amount of Equity Component		40,600,000
Debt issuance cost and debt discount		4,300,000
Debt issuance cost		2,900,000
Purchase price		53,400,000
Debt issuance cost and debt discount, equity portion		1,400,000
Fair value of the Notes			84,300,000	$ 75,300,000
Loss on extinguishment of debt		4,200,000
Amount allocated to the embedded conversion option		$ 6,800,000	7,000,000
Number of business days in conversion condition | d		5
Repurchased face amount		$ 50,900,000
Debt issuance cost written off		500,000
Initial fair value of the liability component		$ 42,400,000
Unamortized offering costs			$ 400,000
Senior Notes | 2018 Convertible Senior Notes | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Consecutive trading days		10 days
Redemption percentage, conversion threshold		98.00%
Senior Notes | 2018 Convertible Senior Notes | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Trading days | d		20
Consecutive trading days		30 days
Redemption percentage, conversion threshold		130.00%
Senior Notes | 2018 Convertible Senior Notes | Debt Instrument, Redemption, Period Three
Debt Instrument [Line Items]
Trading days | d		20
Consecutive trading days		30 days
Redemption percentage		100.00%

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Borrowings - Convertible Senior Notes Amounts Recorded in Company's Financial Statements (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
Convertible debt principal	$ 270,355	$ 270,355
Unamortized debt discount	(68,637)	(77,440)
Unamortized debt issuance costs	(3,959)	(4,584)
Net carrying amount of convertible debt	$ 197,759	$ 188,331

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Borrowings - Summary of Interest Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Debt Disclosure [Abstract]
Contractual interest expense	$ 762	$ 523	$ 2,310	$ 1,423
Amortization of debt issuance costs	208	610	625	813
Accretion of debt discount	2,989	1,715	8,803	4,628
Net interest expense	$ 3,959	$ 2,848	$ 11,738	$ 6,864

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Borrowings - Aggregate Maturities of Borrowings (Detail) $ in Thousands	Sep. 30, 2016 USD ($)
Debt Disclosure [Abstract]
2016 - 2017	$ 0
2018	69,105
2019	0
2019 and thereafter	201,250
Total	$ 270,355

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Stock-based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Jan. 01, 2016	Dec. 31, 2015	Jan. 01, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term (in years)		10 years
Additional paid-in capital pool related to tax windfall benefits from stock option exercises		$ 10.9
Net operating loss carryforwards but not reflected in deferred tax assets		$ 53.5			$ 50.4
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value (in dollars per share)		$ 16.14	$ 15.73
Intrinsic value of stock options exercised		$ 4.3	$ 3.7
Cash received from stock options exercised		13.9	$ 3.0
Unrecognized stock-based compensation expense related to unvested options		$ 13.6
Weighted average period of compensation expense to be recognized (in years)		1 year 11 months 9 days
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value (in dollars per share)		$ 34.02
Unrecognized stock-based compensation expense related to unvested options		$ 61.0
Weighted average period of compensation expense to be recognized (in years)		1 year 11 months 19 days
Number of shares held by officers and employees		1
Restricted stock units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		3 years
Restricted stock units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		4 years
Performance stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value (in dollars per share)		$ 32.96
Unrecognized stock-based compensation expense related to unvested options		$ 0.2
Weighted average period of compensation expense to be recognized (in years)		7 months 28 days
Share-based compensation expense reversed due to change in number of shares expected to vest	$ 1.4
Number of shares held by officers and employees		1
Performance stock units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		3 years
Performance stock units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		4 years
Equity Incentive Plan 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional shares of common stock (in shares)				1,250,000		1,250,000
Shares available for future issuance (in shares)		794,538
Stock Grants
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term (in years)		5 years
Equity Incentive Plan 2009 | Prior to January 1
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		4 years
Equity Incentive Plan 2009 | Post January 1
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		3 years

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Stock-based Compensation - Summary of Stock-based Compensation Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total recognized stock-based compensation expense	$ 14,021	$ 9,157	$ 38,307	$ 30,387
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total recognized stock-based compensation expense	2,009	2,212	6,156	5,563
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total recognized stock-based compensation expense	11,365	8,043	30,930	24,032
Performance stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total recognized stock-based compensation expense	$ 647	$ (1,098)	$ 1,221	$ 792

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Stock-based Compensation - Summary of Activity for Stock Options (Detail) - Stock options $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Number of Options Outstanding (in shares)
Balance, December 31, 2015 (in shares) | shares	1,998,875
Granted (in shares) | shares	483,450
Exercised (in shares) | shares	(428,424)
Forfeited (in shares) | shares	(130,530)
Expired (in shares) | shares	(10,373)
Balance, September 30, 2016 (in shares) | shares	1,912,998
Vested, September 30, 2016 (in shares) | shares	900,953
Exercisable, September 30, 2016 (in shares) | shares	900,953
Weighted Average Exercise Price (in dollars per share)
December 31, 2016 (in dollars per share) | $ / shares	$ 29.48
Granted (in dollars per share) | $ / shares	35.66
Exercised (in dollars per share) | $ / shares	32.36
Forfeited (in dollars per share) | $ / shares	32.26
Expired (in dollars per share) | $ / shares	32.84
September 30, 2016 (in dollars per share) | $ / shares	30.18
Vested, September 30, 2016 (in dollars per shares) | $ / shares	27.27
Exercisable, September 30, 2016 (in dollars per share) | $ / shares	$ 27.27
Weighted Average Remaining Contractual Term (years) and Aggregate Intrinsic Value
Weighted Average Remaining Contractual Term (years), Balance, September 30, 2016	7 years 4 months 10 days
Vested, September 30, 2016, Weighted Average Remaining Contractual Term (years)	5 years 8 months 9 days
Exercisable, September 30, 2016, Weighted Average Remaining Contractual Term (years)	5 years 8 months 9 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Balance, September 30, 2016 | $	$ 31,317
Vested, September 30, 2016, Aggregate Intrinsic Value | $	17,375
Exercisable, September 30, 2016, Aggregate Intrinsic Value | $	$ 17,375

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Stock-based Compensation - Summary of Activity for RSUs (Detail) - Restricted stock units	9 Months Ended
	Sep. 30, 2016 $ / shares shares
Number of RSUs (in shares)
Beginning balance (in shares) | shares	1,512,022
Granted (in shares) | shares	1,444,344
Vested (in shares) | shares	(803,246)
Forfeited (in shares) | shares	(93,703)
Ending balance (in shares) | shares	2,059,417
Weighted Average Grant Date Fair Value (in dollars per share)
Beginning balance (in dollars per share) | $ / shares	$ 33.19
Granted (in dollars per share) | $ / shares	38.04
Vested (in dollars per share) | $ / shares	34.02
Forfeited (in dollars per share) | $ / shares	34.60
Ending balance (in dollars per share) | $ / shares	$ 36.23

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Stock-based Compensation - Summary of Activity for PSUs (Detail) - Performance stock units	9 Months Ended
	Sep. 30, 2016 $ / shares shares
Number of PSUs (in shares)
Beginning balance (in shares) | shares	550,088
Granted (in shares) | shares	0
Vested (in shares) | shares	(75,463)
Forfeited (in shares) | shares	(1,641)
Ending balance (in shares) | shares	472,984
Weighted Average Grant Date Fair Value (in dollars per share)
Beginning balance (in dollars per share) | $ / shares	$ 26.87
Granted (in dollars per share) | $ / shares	0.00
Vested (in dollars per share) | $ / shares	32.96
Forfeited (in dollars per share) | $ / shares	23.72
Ending balance (in dollars per share) | $ / shares	$ 25.91

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Taxes - Additional Information (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Income Tax Disclosure [Abstract]
Effective income tax rate (as a percent)	33.70%	31.60%
Benefit related to U.S. research and developments credits claimed in prior years	$ 2.1
Deferred tax liability for undistributed earnings	$ 10.8

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Income (loss) per share data - Summary of Reconciliation of Numerator and Denominator of Earnings per Share Computation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings Per Share [Abstract]
Net loss	$ (605)	$ (3,251)	$ (5,009)	$ (11,444)
Weighted average common shares outstanding, basic and diluted (in shares)	29,878	29,322	29,491	29,182
Net loss per share, basic and diluted (in dollars per share)	$ (0.02)	$ (0.11)	$ (0.17)	$ (0.39)

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Income per share data - Additional Information (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average effect of potentially dilutive securities excluded contribution (in shares)	923,561	508,377	888,171	633,990
Stock Options, Exercise Prices Exceed Average Market Price
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average effect of potentially dilutive securities excluded contribution (in shares)	265,546	1,488,820	1,090,717	1,606,984
Senior Notes | 2022 Convertible Senior Notes
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average effect of potentially dilutive securities excluded contribution (in shares)	686,211		167,570
Senior Notes | 2018 Convertible Senior Notes
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average effect of potentially dilutive securities excluded contribution (in shares)	96,636

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Segment and Geographic Information - Summary of Revenue and Long-Lived Assets, Net, by Geographic Area (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) reporting_unit	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of reportable segments | reporting_unit			1
Revenue:
Total Revenues	$ 84,122	$ 69,097	$ 238,979	$ 189,252
Long-Lived Assets, net
Total Long-Lived Assets, net	27,117		27,117		$ 27,314
North America
Revenue:
Total Revenues	46,696	40,028	132,545	114,319
Long-Lived Assets, net
Total Long-Lived Assets, net	20,671		20,671		21,135
United States
Revenue:
Total Revenues	38,500	36,900	119,400	107,900
Long-Lived Assets, net
Total Long-Lived Assets, net	20,300		20,300		20,900
EMEA
Revenue:
Total Revenues	23,531	16,625	68,000	48,194
Long-Lived Assets, net
Total Long-Lived Assets, net	2,742		2,742		5,008
Emerging Markets
Revenue:
Total Revenues	13,895	$ 12,444	38,434	$ 26,739
Long-Lived Assets, net
Total Long-Lived Assets, net	$ 3,704		$ 3,704		$ 1,171

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Subsequent Events (Details) $ in Millions	Oct. 28, 2016 USD ($)
VoIP Logic, LLC | Subsequent Event
Subsequent Event [Line Items]
Consideration paid	$ 13.4